Thiruvananthapuram, Oct 10 A committee set up to review the KIIFB has recommended ending its role as a separate fund-raising and project-financing body, calling into question the financial model that has underpinned the state’s infrastructure spending.
In its report tabled in the Keralam Assembly on Thursday, the committee, headed by retired IAS officer Sudha Pillai, said KIIFB’s original rationale of raising funds without using the state’s borrowing space had lost its relevance, as its borrowings are now counted against that space.
It also noted that KIIFB borrows at a higher cost than the state government and that its liabilities are, in substance, direct liabilities of the state.
“The Committee finds no case for the continuation of KIIFB as a body that raises funds and finances projects,” the report said.
The recommendations could have significant implications for Keralam’s infrastructure financing, public debt and ongoing projects, as the committee has proposed that the government take responsibility for KIIFB’s existing debt and fund the completion of prioritised projects through the annual Budget.
The report also raises questions about the financial viability of KIIFB-funded projects, including a major land acquisition plan in Kannur and Palakkad.
The project, initially estimated to cost Rs 12,727 crore, could see its acquisition cost rise to around Rs 15,000 crore, according to the review.
The committee has recommended that the Comptroller and Auditor General (CAG), through the Accountant General’s office in Keralam, be requested to conduct a performance audit of KIIFB under Section 14(1) of the CAG’s DPC Act, 1971.
The proposed audit would cover the 10-year period from 2016-17 to 2025-26 and should be undertaken at the earliest, it said.
The panel has also recommended that KIIFB should no longer be permitted to raise funds through market borrowings. Sections 8, 9 and other relevant provisions of the KIIFB (Amendment) Act, 2016, would have to be omitted to give effect to the proposal.
The committee said the premise that KIIFB-funded projects would generate revenue had not materialised.
“The premise of revenue-generating projects has not held,” the report said, adding that KIIFB’s functioning had also departed from the Rules of Business and that the Centre’s policy on off-budget borrowings left no room for it to operate as a separate borrower.
The panel has recommended that the state make adequate provision in its annual Budget to meet KIIFB’s repayment obligations on bonds, debentures and loans.
It has also proposed that existing infrastructure projects already initiated by KIIFB, subsequently prioritised by the government and at various stages of implementation be completed by the respective government departments with the support of implementing agencies.
The funds required for completing these projects should be provided as capital expenditure in the annual Budget over the next five years, beginning in 2026-27, the report said.
To reduce the interest burden, the government should take steps to replace or swap KIIFB’s existing high-cost debt with lower-cost liabilities wherever feasible.
The committee has further recommended cancelling the government order that provides for transferring a share of revenue from motor vehicle tax and cess on petroleum products directly to KIIFB once the state assumes responsibility for its debt obligations.
The report has raised specific concerns over KIIFB’s project to acquire 5,366 acres for industrial infrastructure in Kannur and Palakkad at an estimated cost of Rs 12,727 crore.
The project, approved by the KIIFB Board in October 2018, envisaged acquiring 4,896 acres in Kannur and 470 acres in Palakkad.
The committee questioned whether the final locations had been selected after a comprehensive assessment of Keralam’s industrial growth centres and their infrastructure requirements.
The 2016-17 Revised Budget had proposed five multipurpose industrial zones, involving the acquisition of 5,100 acres at an estimated cost of Rs 5,100 crore. The proposed locations were Pattannor-Panayathuparambil in Kannur, Thodupuzha in Idukki, Mangada, Vizhinjam in Thiruvananthapuram and Kasargod.
The committee pointed out that the subsequent KIIFB-approved plan provided for 4,896 acres in Kannur and 470 acres in Palakkad, while Thodupuzha and Vizhinjam were left out.
It also flagged the absence of a detailed project report when the Board approved the acquisition, noting that the decision was based on a concept note submitted by the Kerala Industrial Infrastructure Development Corporation (KINFRA).
According to information furnished by KINFRA, KIIFB had disbursed around Rs 2,489 crore, resulting in the acquisition of nearly 1,000 acres in Kannur district. The land acquisition was financed through a loan from the Housing and Urban Development Corporation (HUDCO), adding to the continuing interest burden.
The latest information cited in the report showed that 12.93 acres had been allocated to the Higher Education Department and 50 acres to the Science and IT Park project.
The committee called for a comprehensive technical, financial, economic and legal review of the project, citing the scale of public investment, continuing borrowing costs, delays and limited visible commercial outcomes.
The UDF government had given a wide-ranging mandate to the committee headed by Sudha Pillai to review the institutional, financial, governance and operational framework of the KIIFB.
The V D Satheesan-led government on July 13 constituted the committee.
(PTI News)
