THIRUVANANTHAPURAM: In line with the ruling UDF’s stated policy, the Kerala Infrastructure Investment Fund Board (KIIFB), the previous LDF government’s flagship, is set to drop anchor. A government-appointed committee headed by former Planning Commission member-secretary Sudha Pillai has recommended that KIIFB cease market borrowings and stop funding projects, finding “no case” for its continuation in its present form.
The report, tabled in the assembly on Thursday after cabinet clearance, recommended that the state repay KIIFB’s debts and transfer ongoing projects to the respective government departments. It also called for an end to the transfer of motor vehicle tax and cess to the board. The state will need around 70,416 crore to repay KIIFB’s loans and complete ongoing and prioritised projects, with repayments extending until 2041-42. This excludes land acquisition.
The panel also recommended a CAG performance audit of KIIFB covering the 10 years from FY 2017.
The five-member panel found that the state transferred 11,869 crore to KIIFB between 2021-22 and 2024-25, equivalent to 99.4% of the board’s loan repayments during the period.
“Fresh infrastructure was financed by fresh borrowings by KIIFB,” the report said.
KIIFB was set up to raise funds without eating into the state’s borrowing limit. But since 2020-21, the Union government has treated its loans as the state’s own borrowings, stripping the board of its raison d’être, the committee said. Kerala has so far lost `25,933 crore in borrowing space on this account. KIIFB also borrowed at higher interest rates than the state.
The panel concurred with the CAG’s finding that KIIFB’s borrowings are not contingent liabilities but off-budget borrowings that bypass Article 293 of the Constitution.
Panel flags violations of Rules of Business
The committee quantified the cost of the KIIFB model to the state at Rs 61,678.46 crore. The government transferred Rs 26,165.93 crore in taxes and cess to KIIFB, while the board’s borrowings cost the state Rs 25,932.53 crore in borrowing space. KIIFB also borrowed Rs 9,580 crore in 2025-26.
Against this, KIIFB has disbursed Rs 42,753.82 crore to projects and holds Rs 5,821 crore in cash, totalling Rs 48,574.82 crore. Had the state funded the projects directly, it could have invested an additional Rs 13,103.64 crore, the committee said.Direct funding would also have ensured legislative oversight and scrutiny by the State
Planning Board, besides mandatory allocations for Scheduled Castes and Scheduled Tribes, it said.
The panel also flagged violations of the Rules of Business. Without a cabinet decision, a meeting chaired by the chief minister overruled the finance department’s refusal to issue fresh loan guarantees to KIIFB. The board has 498 employees against just 40 sanctioned posts, and revised salaries without government approval.
Under the committee’s plan, government departments will complete KIIFB-funded projects using budgetary allocations over five years, starting 2026-27.
Fallen promise
The claim that some of KIIFB’s projects would pay for themselves did not hold, according to the govt-appointed committee.
The board spent L8,882 cr on 44 projects classified as “revenue-generating” and received L4,198 cr back. Only three of these projects, KSEB’s Transgrid 2.0, Petrochemical Park in Kochi and the first building at Technocity, made repayments from their own earnings — together L3,352 cr, it said.
The rest of the repayments were from government funds.
The committee termed the classification as revenue-generating “fiscally misleading”.