Thiruvananthapuram: To execute the slew of projects proposed in the last two budgets by mobilizing funds through the Kerala Infrastructure Investment Fund Board (KIFB), the LDF government faces an uphill task of raising extra-budgetary resources worth Rs 40,000 crore.
This amount is equal to 33 percent of the estimated total expenditure for the fiscal 2017-18.
Despite widespread apprehensions over the viability of the plans to raise such a huge amount outside the budget through KIIFB, finance minister Thomas Isaac has exuded confidence about the potential of the alternative method which will act as the prime Special Purpose Vehicle (SPV) for mobilizing and channeling funds to various infrastructure projects.
But the task is not at all easy. At a time when the state is going through a serious financial crisis, the LDF government is treading a new and risky path to raise funds, execute mega projects and boost investment.
Schemes worth Rs 40,000cr
Last November, the government had granted approval to projects worth Rs 4,000 crore under KIIFB. The total outlay of projects scheduled to be cleared by March end has been estimated at Rs 11,000 crore, while the ‘KIIFB projects’ announced in the recent Budget are worth Rs 25,000 crore, taking the total funds to be mobilized through KIIFB to Rs 40,000 crore.
A majority of the proposals approved by the Cabinet are in tendering stage. It is anticipated that the execution of all these projects will be delayed further.
So far, the total amount collected via cess on fuel and motor vehicle registration charges has reached Rs 2,000 crore. Bonds will be issued to raise more extra-budgetary funds. The estimated amount to be mobilized via the Kerala State Financial Enterprises’ (KSFE) NRI chit funds is Rs 12,000 crore.
In total, the government is looking to raise as much as Rs 50,000 crore in five years with the help of these specific resource mobilization means.
Though the proposals under KIIFB were announced in the Budget, they will remain outside the budgetary framework for the very reason that the funding will be done via extra-budgetary sources.
The idea is great and ambitious, but it is to be seen how the government which is grappling with an acute financial crisis is going to mobilize such a huge fund through an innovative method like KIIFB.
The government has roped in former Comptroller and Auditor General (CAG) of India Vinod Rai to head the KIIFB advisory commission in a bid to the boost the state’s image as an investor-friendly destination.
The chief minister also has high hopes on KIIFB, especially after the idea received appreciation and positive feedback from his financial advisor Gita Gopinath.
Coping with failure
The government has earmarked Rs 2,000 crore for the renovation of district, taluk and general hospitals, Rs 100 crore for setting up modern abattoirs, Rs 500 crore for upgrading schools with more than 1,000 students, Rs 1,000 crore for providing free internet facilities, Rs 6,500 crore for 630-km long coastal highway, and Rs 3,500 crore for 1,267-km hill highway covering nine districts.
All these ambitious targets in infrastructure and social sector development are expected to be met through KIIFB. If the attempts to mobilize the required funds to meet these long-term requirements fail, it will definitely upset the growth plans envisaged by the present government for the next five years.
The previous UDF government was successful in introducing many development projects and welfare programs during the past five years. Carrying forward that momentum will be the biggest challenge for Pinarayi Vijayan and his team.
FM oozing confidence
The coffers of KIIFB is empty now, but that does not worry Thomas Isaac.
He believes that there will be enough time to mobilize resources before a project gets ready for commissioning. Funds will be released to contractors only after the completion of each project. Most of the projects will take 1-5 years for completion. If the government starts raising funds now itself, it will remain a redundant asset for years, inviting hefty interests. So deposits under KIIFB will be made only if a necessity arises.
The work on developing a dedicated software to keep records of the funds raised through KIIFB is under way, it is learnt.