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Kerala Finance Minister Thomas Isaac. (Filephoto/ANI)
Kerala Finance Minister Thomas Isaac. (Filephoto/ANI)

KIIFB borrowings bypass limits for State, have no constitutional nod: CAG report

ANI | Updated: Jan 19, 2021 06:07 IST

Thiruvananthapuram (Kerala) [India], January 19 (ANI): The Comptroller Auditor General (CAG) rapped the State government over Kerala Infrastructure Investment Fund Board (KIIFB), which it termed is not adhering to constitutional provision and "bypass the limits set on Government borrowings under Article 293 of the Constitution of India".
The 'State Finance Audit Report' by the CAG was tabled in Kerala Assembly by Finance Minister Thomas Isaac here on Monday, who had criticised the report in public earlier and shared details for which he is facing an inquiry by Assembly Privilege and Ethics Committee.
The CAG in its report found that KIIFB's case is a classic case of off-budget borrowings, which violates provisions in the constitution.
"As the state government chooses to raise funds in the name of KIIFB, and the debt is to be discharged from its own revenue, such as cess on petroleum and a part of the motor vehicle tax, then the State government has definitely created a liability on its own revenue resources. This is a classic case of off-budget borrowings, which firstly, bypasses the limits set on government borrowings under Article 293 of the Constitution of India and secondly, it violates the provision of entry 37 of List I," said CAG in its audit report.
The report also said that such borrowings for all practical purposes, represent the fiscal deficit of the State and should be treated as such when Isaac all along had argued that it is not a liability to the state as the state is not directly borrowing.
"Creating such liabilities, without disclosing them in the budget, raises questions both of transparency, and of inter-generational equity. Merely because the borrowing is not shown in the budget does not mean that the liability of discharging it from the State revenues will disappear," argued the report.
The audit report also criticised the 'Masala Bonds' undertaken by KIIFB on its check on debts incurred by the State government.

"KIIFB borrowed and raised funds amounting to Rs 33,106.57 crores from financial institutions till 2018-19 by the issue of bonds, which were to be re-paid from the petroleum cess and part of motor vehicle tax set apart by the Kerala government from its own revenue resources for transfer to KIIFB.
This included an amount of Rs 2,150 crores raised through Masala Bonds in foreign countries. Since KIIFB has no source of income, the borrowings by KIIFB for which State Government stood as a guarantor, may ultimately turn out to be a direct liability of the State Government," it said.
"Any servicing of these debts by the State Government would entail surpassing the FFC and KFR fiscal deficit target of 3 per cent (in the current year it already stands at 3.45 per cent) and the debt- GSDP ratio of 30 per cent (in the current year it stands at 30.91 per cent). Further, such off-budget borrowings are not in accordance with Article 293 (1) of the Constitution of India," the report stated.
Meanwhile, Kerala Finance Minister who had contented the report all the while had presented the audit report with an objection note.
The opposition Congress-led UDF objected to the note by Isaac by calling it unprecedented. Union Minister V Muraleedharan, in a tweet, said the CAG report was "a tight slap on the corrupt regime of Vijayan Pinarayi. CAG report tabled in Kerala Assembly, on the KIIFB stated that Chief Minister Office Kerala used it against the Constitution of the country by flouting norms," he said.
'"Government-run by Vijayan Pinarayi has deliberately entered into the domain of Union Government. This was precisely the reason why his cronies have been opposing the report," he tweeted.
He added that it is shame that the Vijayan government "broke all rules to serve its interests and provide a cover for those aiming to destabilise the country by way of 'shady dealings through apparatuses like KIIFB". (ANI)