Balagopal junks CAG advice, keeps KIIFB figures out of Budget

Kerala Finance Minister K N Balagopal, in keeping with the tradition bequeathed to him by his predecessor Thomas Isaac, has defied the Comptroller and Auditor General (CAG).

In the latest CAG report on State Finances, tabled in the Assembly last November, the government was asked to include all the borrowings it makes on behalf of Kerala Infrastructure Investment Fund Board (KIIFB) in its annual budget statement.

Balagopal has refused to play ball, even though the government had told the CAG in 2021 that the recommendation would be considered. Not a single rupee spent by KIIFB has gone into Balagopal's deficit calculations though the CAG had wanted it.

During his speech, Balagopal made nearly 40 references to KIIFB and reeled out the names of a slew of small and big projects, including K-Rail, that would use KIIFB funds. Kerala's big capital investment push - in agro parks, food processing parks, skill parks, industrial facilitation parks, Medical Tech Innovation Park, Knowledge Economy Mission, industrial corridors, K-FON, highways, and international hostels - is done through KIIFB. Yet, KIIFB's humongous contribution was kept outside the Budget. As many as 962 projects worth Rs 70,762.05 crore have so far been sanctioned through KIIFB.

Kerala government's contention is that KIIFB's loans are contingent liabilities. Meaning, the government has to step in only as a last resort when something unforeseen happens. The CAG has rejected this line of argument.

It has consistently maintained that only the debts of public sector units or autonomous bodies that have their own sources of income could be considered contingent. Such liabilities fall on the government only rarely.

In KIIFB's case, the government has to step in all the time. "KIIFB has no revenue of its own and the state government has to defray the debt obligations of KIIFB by transferring its own revenue resources on a regular basis through the state budget," the CAG report said.

Under Kerala Infrastructure Investment Fund Act, Kerala sets apart 50% of its annual motor vehicle tax revenue and the whole of petrol cess for KIIFB.

"Merely, because these repayment obligations are provided in the Act does not detract from the fact that the liabilities of KIIFB are a direct charge on the Government’s own revenue resources and are thus direct liability of the State Government," it said.

The CAG also found "untenable" the state government's contention that the records and statements of KIIFB are laid before the Legislature and, therefore, has legislative approval. "The borrowings and expenditure of KIIFB are not included in the state budget documents for the vote of the legislature," the report said. In an earlier report, the CAG report had called this practice "unconstitutional".

If Balagopal were to heed the CAG's advice, the already shaky fiscal figures would have looked even more dangerous. KIIFB's borrowings would definitely puff up the fiscal deficit, making it look far uglier than the 3.91% Balagopal has estimated for the 2022-23 fiscal.


The comments posted here/below/in the given space are not on behalf of Onmanorama. The person posting the comment will be in sole ownership of its responsibility. According to the central government's IT rules, obscene or offensive statement made against a person, religion, community or nation is a punishable offense, and legal action would be taken against people who indulge in such activities.