Kerala Infrastructure Investment Fund Board (KIIFB), in the form that it has been known till now, has been buried. Its epitaph was written by finance minister K N Balagopal in his budget speech on Friday, February 7. The unique non-revenue funding model conceptualised by Balagopal’s predecessor, Thomas Isaac, has been laid to rest.
Under Isaac, KIIFB was the anti-neoliberal, people-centric Left alternative for creating major public assets. The assets KIIFB had created, like hi-tech schools and colleges, well-endowed hospitals and highways and bridges, were for the free use of the public. KIIFB was the product of a socialist fantasy. Not any more.
The enjoyment of KIIFB’s assets will, from now on, come with a price. The Board has been restructured as a revenue-generating mechanism. Two pilot projects, both planned as revenue earning, will kick off this new chapter in KIIFB’s existence.
One is in Kollam City, and the other is in Kallada near Kottarakkara, again in the Kollam district. Even the ambitious Global Industrial Finance and Trade (GIFT) City project, set to come up in Ayyampuzha panchayat near Angamaly, was not meant to earn revenue. Nor was the Rs-293.22-crore Kannur IT Park.
The revenue-earning Kollam City Park will come up in the land owned by Kollam Corporation. For the development of the park, there will be a tripartite agreement between KIIFB, KINFRA and Kollam Corporation.
The first phase will be completed in the 2025-26 fiscal. The second ‘pilot project’ will be established on the campus of the Kallada Irrigation Project situated in Ravi Nagar in Kottarakkara. The proposed state-of-the-art IT park will have a built-up area of 97,370 sq ft.
Common to both these projects are unused public lands. And these public lands, left idle, will be at the heart of the new KIIFB strategy. Reason: It would considerably lower land acquisition costs. This, in turn, will bring down the levies that any KIIFB project will have to impose on the people to earn revenues.
The minister, after announcing these as part of the “revenue-generating projects proposed to be funded from KIIFB”, declared on the floor of the House: “These will turn out to be profitable.” The message was directed up north. The Centre had told Kerala that since KIIFB did not generate its own revenue, its debts would be included in the state’s annual open market borrowing limit.
A recent RBI circular has also made it doubly difficult for KIIFB to exist in its original form. The RBI had told public sector banks to stop lending to government-funded projects. KIIFB is a government-dependent scheme as it receives nearly Rs 4000 crore from the Kerala budget annually. Some of its biggest lenders were public sector banks like SBI, Canara Bank and also NABARD, and it was felt that such a parasitic bond with the government could drive these banks away from KIIFB.
The longevity of KIIFB’s revenue-generating avatar will now depend on the success of these two pilot projects. If these succeed, the minister said detailed plans for 100 new basic infrastructure development projects using unused land of Government departments, PSUs and LSGIs would be formulated in the next two years. The local bodies will also be able to raise funds through municipal bonds and invest in revenue-generating projects in future.
The minister, even though it was not explicitly stated in the Budget speech, later gave a clear hint that KIIFB could no longer take up non-revenue projects. “Earlier, the money that KIIFB borrowed was not included in our borrowing limit. This is not the case now.
“The Rs-12,000-crore that KIIFB annually borrows on an average under the second Pinarayi government is included in the state’s borrowing limit,” he said after his Budget speech, implying that there was no option but to find a way out to keep KIIFB’s borrowing outside the state’s borrowing limit. However, the minister argued that even if KIIFB becomes a revenue model, it will not be under as much pressure as a private entity to recoup its investments.
“Annually, the state government transfers nearly Rs 4000 crore to the KIIFB. So if there is a Rs 100 crore project, the money KIIFB attempts to recover will be far less than what a private entity would,” the minister said after the budget presentation. Though KIIFB has been asked to earn money, the government would continue to provide the necessary cushion.