THIRUVANANTHAPURAM: Setting a new precedent in the assembly, the Comptroller and Auditor General (CAG) report was tabled in the house with a note of strong objection by Finance Minister T M Thomas Isaac on Monday. As expected, the CAG report raised serious questions on the transparency of Kerala Infrastructure Investment Fund Board (KIIFB) borrowings.
It said the borrowings of KIIFB including masala bond lack transparency and constitutional validity. The borrowings will become a liability on the state’s own income in future, the report said.The assembly also witnessed tumultuous scenes when the report was tabled. The speaker gave permission to Isaac to submit his dissent note along with the CAG report which invited sharp criticism from the Opposition benches.
V D Satheesan, MLA, said, “If the finance minister is allowed to submit a dissent note while tabling the report, it would set a precedent and the ministers in future will insist on recording their statements each time the CAG report on their department is tabled, so it should be avoided,” he said. However, the speaker gave permission to the minister to record his reservation against the report.
While countering the Opposition charges, Isaac said his opposition is not against the merit of the report but the CAG had made grave procedural violations in the manner of preparation and submission of the state’s finance audit report for the year ending March 2019. The final report has appended more pages, which were not part of the draft report, which is against the laid-down rules of CAG, he said.
CAG report: State claims it can repay liabilities
The government provides guarantee for the principal and interest for the loans KIIFB received. Therefore borrowings can be termed as contingent liabilities. The state can repay its liabilities using the petroleum cess and share of motor vehicle tax being received every year. The borrowings by issuing bonds would become a liability on the government if KIIFB defaults on repayment. If any government borrows money in the name of any PSU/AB (autonomous body) which has no independent source of income and the loan is to be repaid by setting apart a share of the government’s resources, the loan is not a contingent liability, but a liability on its own income. As the government chooses to raise funds in the name of KIIFB and the debt is to be “discharged” from government’s revenue such as cess on petroleum and a part of motor vehicle tax, it has definitely created a liability on its own revenue resources.
This is a classic case of off-budget borrowing which bypasses the limits set on government borrowings under Article 293 of the Constitution. Creating such liabilities without disclosing them in the budget raises questions of transparency and inter-generational equity.
The CAG says the maximum amount of borrowings of KIIFB is done through masala bond which is an external commercial borrowing. The Constitution gives the powers to raise foreign loans only to the Centre. Here the entire payment is being done through government’s own revenue resources and, therefore, such foreign borrowings are that of the state. Hence, they appear to be in violation of the Constitution and encroachment on the Centre’s powers.
Clean chit to FM
T’Puram: The assembly’s Privileges and Ethics Committee on Monday concluded that there was no breach of privilege on the part of Finance Minister Thomas Isaac in revealing the contents of the CAG report. The panel’s report, with the dissent note from its three Opposition members, will be submitted in the assembly on Wedenesday.
Fund and masala bond
KIIFB borrowed/raised funds to the tune of C3,106.57 cr till 2018-19 including C2,150 cr through masala bonds
Off-budget borrowings are not in accordance with Art 293 (1) of Constitution
The state govt has set apart
C3,372.85 cr to KIIFB as petroleum cess and share of motor vehicle tax till 2018-19