THIRUVANANTHAPURAM: Despite years of criticism, the new UDF government is learnt to have decided to retain KIIFB while curbing its independent market borrowing powers. Government sources said the move is aimed at addressing long-standing concerns over off-budget financing and mounting public debt liabilities.
Instead of allowing KIIFB to raise funds directly from the market, the government is understood to be considering a new mechanism under which the state would raise development loans and route the funds to KIIFB as grants for infrastructure projects. A proposal to this effect had earlier been submitted to the previous LDF government, but was rejected over concerns that it would undermine KIIFB’s autonomy, sources said.
“When KIIFB borrows from the market, interest rates can go up to eight or nine per cent. But when the state raises development loans through the Reserve Bank, the average interest rate is around seven per cent,” a senior government official said.
The Union government’s decision to classify KIIFB borrowings as part of the state’s liabilities has sharply reduced Kerala’s borrowing limit. Against this backdrop, the new government is planning to end KIIFB’s direct market borrowings to avoid high-interest loans, sources said.
“The main reason for dropping the proposal to dissolve KIIFB is that the development projects it executed at the local and constituency levels have become indispensable,” a government source said. “Many KIIFB-funded projects are still under way, including in the constituencies of UDF MLAs. In this situation, the government’s only option is to restructure KIIFB,” the source added.
Asked about KIIFB’s future if the UDF came to power, V D Satheesan had told TNIE during the election campaign: “We have a commitment. The state has provided sovereign guarantee for KIIFB’s borrowings. The state is therefore responsible for the loans availed by KIIFB. The option before us is to study the issue comprehensively and restructure KIIFB.” The UDF is also weighing a proposal to stop routing Motor Vehicle Tax revenue and fuel cess collections to KIIFB.
Govt may revisit toll on KIIFB-built roads
The leadership believes the move could pave the way for a cut in petrol cess, offering marginal relief in fuel prices. With KIIFB lacking an independent revenue stream, the government will need to devise a mechanism to service its existing debt. However, UDF leaders believe the proposed borrowing model would ease the repayment burden by securing loans at lower interest rates.
Meanwhile, there are indications that the new government may revisit toll payment on KIIFB-built roads and bridges, a proposal the previous LDF government had shelved following public backlash.