THIRUVANANTHAPURAM:The much-hyped Pravasi Chitty of KSFE is embroiled in a controversy after former Finance Minister K M Mani raised severe criticism against the scheme.Though Finance Minister Thomas Isaac has offered an explanation, the issue is likely to affect the prospects of the scheme to mobilise funds for the Kerala Infrastructure Investment Fund Board (KIIFB).
Pravasi Chitty was a Budget proposal of Isaac to mop up Rs 10,000 crore from non-resident Keralites (NRKs) by assuring extra benefits such as insurance coverage and linkage with NRK welfare measures of the government.
According to Mani, the Chitty law does not permit KSFE to transfer its funds to another agency.
“The Reserve Bank of India’s sanction or amendment in the Chitty Act is necessary for such a fund transfer. Depositing chitty instalments or the security amount with KIIFB is also against the provisions of FEMA (Foreign Exchange Management Act),” he said.Though Isaac refuted this claim citing an RBI order that allows NRKs to participate in chit funds run by state-approved agencies, he did not offer an answer for validity of the transfer of funds to KIIFB under FEMA.
But Isaac said the security amount of KSFE can be deposited in KIIFB under the provision in chitty rules that allows deposits in government-recognised securities.“As per the Kerala Infrastructure Investment Fund (Amendment) Act, 2016, the government provides cent per cent guarantee for KIIFB bonds. Also, KSFE had received the state government’s sanction for depositing funds in KIIFB,” he said.
Mani also flayed the government decision to utilise the Pravasi Chitty funds for non-profit development works such as the coastal and hill highway projects, which increases the risk on returns for NRKs.
Isaac’s office and KSFE are planning a massive campaign to blunt the allegations against the chitty scheme.