KOCHI: The state does not have to choose between retaining the Kerala Infrastructure Investment Fund Board (KIIFB) and abandoning its current borrowing model. Economists say the institution can be retooled to develop infrastructure projects, facilitate alternative funding and preserve the expertise it has accumulated, even as the UDF government weighs a review committee’s criticism of its financing mechanism.
Crucially, the panel, headed by former Planning Commission member-secretary Sudha Pillai, has not recommended shutting down KIIFB. It has called for discontinuing its existing financing model, which relies on borrowings that count against the state’s borrowing limits and carry higher financing costs. The distinction matters: dismantling KIIFB could mean losing project development and execution capabilities without resolving Keralam’s underlying infrastructure funding needs, they say.
Rudra Sensarma, professor of economics at IIM-Kozhikode, feels the economic case for continuing KIIFB’s borrowing-led model had weakened, but its accumulated expertise should not be discarded. “Rather than discarding KIIFB’s accumulated expertise, the government could transform it into an infrastructure project development and financing facilitation agency,” he says.
A restructured KIIFB 2.0 could prepare investment-ready projects, assess their economic returns and identify suitable funding options instead of borrowing directly. Social infrastructure could be supported through budgetary allocations while commercially viable projects could attract private capital.
Sensarma also suggests creating project-specific special purpose vehicles (SPVs) to execute projects, particularly industrial and IT parks, and exploring public-private partnerships for transport and logistics infrastructure. This could allow projects to be structured around their individual requirements rather than placing the entire burden of financing and execution on KIIFB.
The government could also draw lessons from infrastructure facilitation models in the UK, Singapore and Tamil Nadu. Prof Sensarma stresses that stronger oversight of project selection and execution is essential, rather than presuming that changing the institutional structure alone would prevent corruption or other irregularities.
Economist K N Harilal, professor at the Centre for Development Studies and a former member of the State Planning Board, says KIIFB had to be assessed against the fiscal circumstances that prompted Keralam to turn to it. The state’s restricted borrowing space and declining share of central resources had pushed it towards alternative avenues to finance infrastructure. Had Keralam enjoyed greater fiscal freedom and received the funds it considered its due, the government might not have relied on KIIFB to the same extent, he says.
Harilal acknowledges that KIIFB had helped overcome the limitations of conventional government departments in implementing large infrastructure projects and mobilising funds. Its contribution to land acquisition for the NH 66 expansion was a case in point. It earmarked nearly `6,000 crore towards 25% of acquisition costs for the project from Kasaragod to Thiruvananthapuram.
The debate over KIIFB’s future also raises a broader question about what constitutes infrastructure.
Dr Raju Rhee, who served as project head of Kerala Genome Data Centre, says KIIFB had approved Rs 100 crore for the project’s first phase, providing a financing framework for developing advanced genomic research and computing capabilities in Keralam. This illustrates the potential for infrastructure financing to extend beyond conventional public works. He says the Kerala Development and Innovation Strategic Council (K-DISC) could identify emerging opportunities and develop innovative projects, while KIIFB could help provide the long-term financing needed to turn them into reality.
Rhee cites government-funded supercomputing facilities in the US and Europe’s EuroHPC initiative as examples of public investment in shared research infrastructure that supports artificial intelligence, healthcare and advanced technologies. Keralam’s universities, hospitals, research institutions and technology workforce could benefit from similar investments, he says.
The value of such infrastructure, Rhee says, should be measured not only by direct revenue but also by the research it enables, startups it supports, skilled jobs it creates and the economic opportunities it generates over the long term.
The way forward, economists suggest, is to separate the question of how KIIFB borrows from the question of whether the state needs the institution’s project development capabilities.
Though the committee stopped short of recommending KIIFB’s closure, ending its current financing model and curtailing its functions could clip its wings and eventually lead to its slow death.
Case for a reset
Set up project-specific special purpose vehicles for industrial & IT parks
Explore pubic-private partnerships for transport & logistics infra
Link fund disbursals to milestones and performance
Prioritise viable projects with clear public benefits