KIIFB says CAG findings one-sided

Rejects charge of debt trap and says it works on an annuity model with a robust revenue source

Amid the row over adverse remarks made by the Comptroller and Auditor General (CAG), the Kerala Infrastructure Investment Fund Board (KIIFB) has defended itself saying that it is not an off-budget borrowing mechanism, but a financial institution which works on an annuity model with a robust revenue source.

The KIIFB has termed the findings in the State Finances Audit Report of the CAG tabled in the Assembly last week one-sided and not grounded in fact. The CAG report interprets KIIFB’s annuity-model system as a borrowing mechanism outside the budget when even the Central Government has resorted to similar transactions, a detailed clarification put out by KIIFB on its Facebook page and website said.

In its State Finances Audit Report for the year ended March 2020 tabled in the Assembly last week, the CAG observed that ‘off-budget’ borrowings made through entities such as KIIFB could substantially increase the liabilities of the State, leading it into a debt trap. The CAG wanted the State Government to disclose details of such borrowings in the Budget.

However, KIIFB has strongly refuted the charge that it could drag the State into a debt-trap. KIIFB is not engaged in an unchecked borrowing spree. Nor has the State Government envisaged it as a short-cut for raising funds for projects outside the budget. Rather, KIIFB is a body corporate designed to mobilise funds for the infrastructure development of the State, KIIFB officials said.

The State Government has entrusted it with implementing infrastructure projects worth approximately ₹70,000 crore. The Government, through law, guarantees KIIFB 50 per cent of the motor vehicles tax and the entire petrol cess collection as growing annuity payment.

The KIIFB director board approves projects by ensuring that the liabilities of KIIFB never exceeds the revenue. In the case of KIIFB, at least 25% of the projects are revenue-generating. Repayments with interest are assured to KIIFB on loans issued to the Kerala State Electricity Board, K-Fone and industrial projects. This amount, combined with the tax share assured by the State Government, ensures that KIIFB never plunges into a debt-trap.

Besides, the Central Government too has engaged in KIIFB-model financial transactions during the period mentioned in the report, KIIFB said. The Centre has given assurance for annuity-model fundings worth ₹76,435.45 crore, according to KIIFB officials.

Till 2019-20, KIIFB has borrowed ₹5,036.61 crore and repaid as interest ₹353.21 crore. The State Government has transferred ₹5,572.85 crore by way of the Motor Vehicle Tax share and petrol cess. Which means, KIIFB has received more money from the government than its liabilities for the period cited above, KIIFB officials said.

Responding to the CAG findings last week, Finance Minister K. N. Balagopal had said that the State Assembly had rejected the CAG findings on KIIFB once before.

Source: Read Full Article