Chief Minister Pinarayi on Wednesday officially unveiled Plan B to keep the Kerala Infrastructure Investment Fund Board (KIIFB) alive. “User fee” will be imposed, and KIIFB will gradually wean away from its dependence on Kerala Budget in such a way that it can be fully transformed into a self-sustainable revenue-earning entity.
Instead of the controversial ‘toll’, “user fee” was the term the Chief Minister used to denote the tool that would be used to reform the KIIFB model. “When user fee is levied, the possibility of repaying KIIFB loans from the collection of user fee alone will open up,” the Chief Minister told the Assembly on Wednesday while taking part in the discussion of the Budget.
“This way, KIIFB could, in a phased manner, do away with government grants,” he said. (The annual transfer of 50% of the motor vehicle tax and the entire petrol cess are the government grants referred to.)
This is the first time that the LDF Government has given a clear hint that the KIIFB would be restructured into a ‘user fee ‘-based model. Till now, the official stand was that no decision on imposing tolls or user fees for KIIFB projects has been taken.
The CM also made it clear that the essence of the forward strategy is to fully disengage KIIFB from the Budget and, thereby, keep the Board’s borrowings out of Kerala’s open market borrowing limit.
The CM also gave a rationale for former finance minister T M Thomas Issac’s official repudiation of tolls in 2019. He said this was said when KIIFB was working according to plan at a time when its debts were not considered part of Kerala’s borrowing.
Pinarayi said that the original plan was for KIIFB to use this annual flow from government coffers as security to mobilise funds for massive infrastructure investment in Kerala through new-age RBI and SEBI-approved instruments (like General Obligation Bonds against unconditional Government guarantee, Revenue Bonds with structured payment mechanism for medium-term requirement, and for long-term requirements tools like Alternative Investment Funds (AIF), Infrastructure Investment Trust (InVIT), and Infrastructure Debt Fund).
KIIFB cruises along till 2022, till the Centre decided to include the funds mobilised by KIIFB in the state’s borrowing limit.
“Such a move was against the legitimate expectations of the state government,” he said. The CM said that it was in the earlier context that the former finance minister had said that there was no need for the collection of tolls from KIIFB’s roads and bridges. A clear message as any that the changed circumstances have necessitated the imposition of tolls/user fees.
As a result of the Centre’s revised policy, the CM said that Kerala’s borrowing capacity was slashed by Rs 15,895.50 crore in 2022. Between 2016 and 2023, the CM estimated that Kerala had an expenditure loss or resource deficit of Rs 1.08 lakh crore.
The CM said it was the Centre’s stand in the Supreme Court that prompted Kerala to think about income generation. “During the hearing, the Centre’s counter was that KIIFB projects were not income-generating like similar central agencies like NHAI (National Highway Authority of India) that were earning revenue to pay back its debts,” the CM said.
He, however, questioned the centre’s NHAI claim. “Only a fraction of NHAI’s repayment was secured from tolls. The substantial part of its repayment is met by open market borrowings and government grants,” Pinarayi said. “If the SC has referred the case (the Centre’s encroachment into Kerala’s fiscal space) to a Constitution Bench, it is only because the apex court has found merit in Kerala’s arguments,” he added.
Further, the CM said that KIIFB had found additional funds on its own. “KIIFB has spent Rs 13,000 crore in addition to the Rs 20,000 crore it had received so far from the government. These funds it had mobilised on its own, and it is KIIFB’s exclusive burden,” the CM said.