Finance minister T M Thomas Isaac sprang a surprise on the opposition on Wednesday when he agreed to an adjournment motion moved by Congress legislator V D Satheesan seeking a discussion on the damning observations made by the Comptroller and Auditor General about the borrowings of Kerala Infrastructure Investment Fund Board (KIIFB).
The CAG, in its State Finance Audit Report that was tabled in the Assembly on January 18, observed that KIIFB'S borrowings were unconstitutional.
Right at the outset, Isaac wanted to know whether the UDF endorsed the CAG's stand that KIIFB was unconstitutional. Satheesan said the CAG had never said KIIFB was unconstitutional but added that he fully endorsed the observations regarding the illegality of KIIFB'S borrowings.
There were three points of contention. One, was the KIIFB move to float 'masala bonds' in London Stock Exchange unconstitutional, as the CAG has said.
The CAG has noted that "entry 37 of List I of the 7th Schedule of the Constitution of India gives the powers of raising foreign loans only the central government."
Isaac argued that the items given in the three lists - union, state and concurrent - were only for legislative purposes. In other words, it placed no bar on a 'body corporate' taking loans from outside.
Isaac argued that KIIFB, like public sector undertakings, was a body corporate and did not come under the definition of state as the opposition had insisted. Under Article 246, Isaac said body corporates had the right to secure foreign loans.
Congress MLA V T Balram argued that the Supreme Court had laid down certain characteristics that defined a 'state', one of which was 'deep and pervasive control'. Balram said KIIFB, which had the chief minister as its chairman and the government funds as its only source of revenue, was under the absolute control of the government.
Two, do KIIFB'S borrowings bypass the borrowing limit fixed for states under Article 293 of the Constitution. off-budget ones. The CAG, and the opposition, insisted they did. Isaac said no.
The minister argued that these loans need not be be reflected in the state's fiscal deficit.
Isaac gave the example of the Centre's off-budget loans, which was Rs 1.86 lakh crore in 2020-21, and said they were not added to the fiscal deficit of the Centre.
Isaac also said KIIFB projects were like the annuity schemes that the previous UDF government had adopted to finance big infrastructure projects like the City Road Improvement Programme and Greenfield stadiums. "All the money has to be repaid by the government and still the UDF government has not included the loans in the budget accounts," he said.
Three, are KIIFB'S liabilities contingent or direct liability. The CAG, and the opposition, said it was direct. The logic was, KIIFB only had government funds to bank on unlike other PSUs or autonomous bodies that had their own revenue streams.
But the minister said the liability was only contingent, that the government had to step in only in case KIIFB defaults. The assured annual sum from the government to KIIFB was assured by law, Isaac said. "It is not a piecemeal affair or tentative," the minister said.
Moreover, he said at least 25 percent of KIIFB projects were revenue generating.
Apparently unsatisfied with the minister's reply, the UDF members staged a walk out.