KOCHI: The state will bear the ultimate liability and accountability for the bonds issued by Kerala Infrastructure Investment Fund Board (KIIFB) as they are backed and guaranteed by the Kerala government, the accountant-general’s (AG) office has said.
An affidavit filed by the AG’s office before the High Court said that from 2015-16 to 2018-19, KIIFB received Rs 6,008 crore for implementation of various projects and of that, Rs 1923.91 crore has been spent for various projects. KIIFB had raised Rs 2,150 crore in March 2019 from international investors through Masala Bonds, becoming the first state government institution in India to do so. The London Stock Exchange (LSE)-listed bonds have a five-year tenure, offering 9.72% interest to investors.
The affidavit was filed by the senior deputy AG (admn), AG’s office Thiruvananthapuram in June 2020, in response to a petition filed by M R Ranjith Karthikeyan through advocate Mathew Kuzhalnadan challenging the constitutional validity of the issue of Masala Bonds to overseas investors by the state government and listing them on the LSE.
In his response to the same petition, KIIFB CEO K M Abraham informed the High Court that the rate of interest at which the Board sold Masala Bonds is relatively less compared to Domestic Bonds (10.72%), issued by the Andhra Pradesh Capital Region Development Authority, a similarly placed entity.
THE affidavit said the CAG is a constitutional authority and the reports prepared by it are laid before the Parliament or appropriate legislature as per Article 151 of the Constitution. As per the procedures and Rules of Business of Parliament, CAG report is referred to the Public Accounts Committee or Committee on Public Undertakings for deliberation by representatives of the electorate. Therefore, the CAG is a key constitutional figure that acts as an instrument ensuring Parliamentary accountability of the executive in all matters involving finance and police, the affidavit said.
The affidavit was filed by the Senior Deputy Accountant General (Admn), the office of the Accountant General (G&SSA), Kerala, Thiruvananthapuram in June 2020 in response to a petition filed by M R Ranjith Karthikeyan through Advocate Mathew Kuzhalanadan challenging the constitutional validity of the issue of Masala Bonds to overseas investors by the state government and listing them on the London Stock Exchange.
The issue of bonds by the state government under the Kerala Infrastructure Investment Fund Act of 1999 had violated Article 293(1), which stipulates that state governments could borrow only within the country. In fact, the Article makes it clear that the executive power of the state to borrow money upon the security of the Consolidated Fund extended only to the territory of the country. Thus, the Article had been violated by issuing rupee-denominated bonds to overseas investors, stated the petition.