When the Sudha Pillai Committee said that the Kerala Infrastructure Investment Fund Board (KIIFB) had "deviated", the implication was that there was an original entity from whose principles the KIIFB under the LDF government had strayed.

And the "original project", according to the Committee, is the KIIFB conceived in 2014 during the tenure of the Oommen Chandy government. The Sudha Pillai Committee fundamentally argued that the KIIFB put in place by finance minister T M Thomas Isaac in 2016 got itself "extinguished" by disowning the 2014 foundational principles of KIIFB.

Anyway, it would not have been politically and ideologically possible for the LDF to adopt these 'foundational principles', which depended heavily on the market and private capital.

Therefore, from another angle, the differences between the UDF and LDF KIIFBs can also be seen as a manifestation of two contrasting economic models. While the 2014 model leaned heavily on private money, the restructured KIIFB under the LDF relied almost fully on public money. While one is a neo-liberal model, the other is a Left alternative.

Deviation # 1: Budget transfers
An important deviation was the decision to mandatorily transfer budgetary funds (motor vehicle tax and petrol cess) to KIIFB. "This change in resources for the Fund represented a recurring and significant drain on Kerala's revenue receipts the state collects yearly," the Committee report noted, echoing what the UDF's White Paper had said.

In the 'original' 2014 model, for the financing of infrastructure projects, the funds were sourced fully from the market. The projects also had to earn money for the 2014 model to work. Meaning, investing in the creation and expansion of public government schools or colleges or hospitals, like Isaac's KIIFB had done, was not a priority.

The 2014 model encouraged private investment in a big way, and plotted the government role as a swiftly falling arc. The model was powered by what is called the "recycling of capital".

"When the infrastructure projects matured, free cash flow (FCF) from viable projects could be expected and it would provide an opportunity to earn a return to investors. At this stage, the government could raise funds by offloading a part of its stake. This recycling of capital would ease the pressure of funding big infrastructure projects from the books of the government," the Concept Note prepared by SBI Capital Markets (SBI Caps) for the 2014 model said.

This meant that the government would initially invest some money as 'bait money' and then, once the project turns the corner, the government would sell its stake to private entities and use this money as 'bait money' in another project. In a way, the government would 'roll' an almost fixed amount of money from one project to the other.

The restructured KIIFB, on the other hand, virtually kept private money out. Its dependence on budgetary funds, in a way, was its undoing.

The government transferred ₹11,869.28 crore to KIIFB from 2021-22 to 2024-25. In the same period, KIIFB's debt service (principal plus interest) was ₹11,944.18 crore. The transfers, therefore, equalled 99.4 per cent of debt service.

The CAG, and then the Centre, said that since KIIFB's money came from the state's budget, its debts should be made part of Kerala's deficit calculations. All of a sudden, it looked like KIIFB had no reason to exist.

"Its original rationale, raising capital without using the State's borrowing space, has been extinguished, since its borrowing is now counted against that space," the Committee noted.

The Committee said that such a deviation increased risk and reduced KIIFB's viability. "KIIFB did not evolve along the path approved in 2014, it took a different one, and that different path is what produced the cost and risk," the Committee said.

Deviation # 2: Scale of infrastructure
Another major deviation was in the definition of 'infrastructure' and 'projects'. The 2016 KIIFB Amendment Act included 23 additional items of infrastructure within its ambit.

And some of them were: farm infrastructure, fisheries, water supply and desalination plants, health and education infrastructure, solid waste management, sewerage treatment plants, slum development, and irrigation. Most of the assets created in these areas were public goods that did not fetch any returns.

In the Committee's view, this aggressive push to create public assets with public money was suicidal. The 2014 model would not have done this.

"Expansion of the definition of infrastructure to include as many as 23 items appears to have impacted the remit of various Government departments. Many departments such as education, water supply, sanitation and local infrastructure suffered. Along with certain departments, certain regions of the State also did not get their due share," the Committee noted.