The KIIFB model allows for tolls and user charges but Finance Minister Thomas Isaac has ruled out, at least for now, any such tax for the use of facilities created by KIIFB funds. Nonetheless, Isaac said in future the public could be asked to part with a small share from the capital gains they would make as a result of an improvement in infrastructure, notably an escalation in land value.
Kerala Infrastructure Investment Fund (Amendment) Act, 2016, empowers KIIFB's private partners to collect levies and user fees and rentals. All kinds of concession agreements envisaged in the Act, be it build-operate-and-transfer (BOT), build-own-and-operate (BOO), build-own-operate-transfer (BOOT), design-build-finance-operate-transfer (BBFOT), all of them allow the private party to collect user fees or rentals or levies.
Now that the law sanctions it, is there any guarantee that private partners would not impose user charges in future. “As of now, there is no project that involves a private partner who can raise funds through user charges. All the special purpose vehicles that are implementing the projects are parastatals (bodies controlled by the state),” Isaac said.
However, he did not fully rule out such impositions. “In future, there could be models,” Isaac said. He hinted that the government itself could ask people to part with some of the gains, a sort of wealth gains tax, that they could have accumulated as a result of KIIFB activities.
An appreciation in land value is one aspect the finance minister had in mind. “Some of these projects would totally transform the area. Say for instance, the hill highway. The land prices could go up. Is there a way of tapping additional resources? These are things that could be debated, and a consensus arrived at. But as of now there is no thinking on these lines,” he said.
Isaac had always believed that an increase in land value in Kerala has resulted in enormous increase in capital gain. His first budget, 'alternation memorandum', this tenure had seen him increasing the stamp duty to tap into this “capital gains” from land.
Isaac also said that a “toll model” was impractical for a body like KIIFB whose primary objective is to dramatically improve the state's infrastructure. He said that most of the projects taken up by KIIFB could not be financed using the revenue-generating models adopted for Kochi Metro or KIAL (Kannur International Airport Limited) or Vizhinjam Transhipment Terminal.
“For instance, take the roads in Kerala. It is almost impossible to have the kind of roads wide enough and with service roads where you can have a toll system in place. It would be damn costly. Therefore, toll model is not possible and therefore best way to go about is through KIIFB,” the minister said.
Furthermore, roads and hospitals are basic necessities. He said roads, highways, hospitals, schools and sports stadiums were required for modern Kerala. “We cannot have a revenue model for that. We will of course have such a model for certain projects like the semi-speed rail corridor but most of the others will be bundled together in KIIFB,” Isaac said. “We chose this new institution very deliberately,” he added.
