On the question of KIIFB’s future

In July, Keralam’s newly elected UDF government set up an expert panel to review the functioning of Kerala Infrastructure Investment Fund Board (KIIFB). The panel, headed by a former civil servant, was tasked with recommending measures to restructure KIIFB and strengthen the government’s institutional capabilities, among other things. The committee has recently submitted its report, which has been tabled in the State Assembly.

Also Read: Keralam Assembly: Opposition walks out over alleged bid to scuttle KIIFB; CM says ongoing projects will continue

Apparently critical of KIIFB’s functioning, the committee has recommended winding it up; absorbing its functions and capabilities into the State government, news reports say. The principal reason for the panel’s recommendation is that with the clubbing of KIIFB’s borrowing function with the State budget, the special purpose vehicle (SPV) has lost its primary purpose.

A disputed investment model

KIIFB, restructured by the LDF government, reportedly boosted the State’s infrastructure investment by raising extra-budgetary resources, including securing soft loans known as “Masala Bonds” from international agencies after the disastrous floods of 2019. However, the SPV’s functioning and financial performance have remained contentious. The comptroller and auditor general’s (CAG) strictures against KIIFB have become a convenient beating stick for the Centre and the Opposition parties in the State. Leftist critics have branded it as the arm of “the Left Managerial State” for promoting controversial projects, bypassing legislative approvals. In the fog of the debate, KIIFB’s original purpose and economic principles underlying it seem to have been lost sight of. We seek to explain them, intending to shed some light on the contentious issue.

Though Keralam has sound traditional transport infrastructure such as road network and rail connectivity, it lags behind in modern facilities, such as high-speed railways or highways, especially when compared to the neighbouring States. Keralam reportedly spends a mere 1.5 per cent of the Gross State Domestic Product (GSDP) on infrastructure. This was so in spite of Keralam’s own-tax revenue to GSDP ratio being among the highest among major States, as per the RBI data.