Will CM Satheesan order death for KIIFB and mine more from gold?

The primary task before the freshly sworn-in V D Satheesan government will be to initiate measures to implement its five election guarantees: Free bus travel for women, ₹1,000 a month for college girls, higher welfare pensions, ₹25 lakh health insurance for families, and interest-free loans of up to ₹5 lakh for small businesses.

Most of these could be announced in the 'revision budget' that will be presented by the new finance minister by the end of May or early June.

Raising welfare pensions to ₹3,000 will be done in stages, like the previous LDF government did. It is also possible that financial viability plans would be drawn up first before the health insurance and free bus rides are made a reality. These promises could have a delayed rollout, after two or three months.

Along with honouring promises, Satheesan will also have to urgently take a call on LDF governance tools and policies he had mercilessly attacked for nearly a decade.

Quick action is called for in the case of at least two. Kerala Infrastructure Investment Fund Board (KIIFB) and revenue from gold. Satheesan had sharply attacked policy issues related to these in his five years as opposition leader.

A top government source said that the 'revision budget' would have measures to at least recalibrate policies that govern these two areas.

Will KIIFB be buried?
Though the Kerala Infrastructure Investment Fund (Amendment) Act, 2016, was passed unanimously, Satheesan had, over the years, warned the government of the dangers of KIIFB's off-budget borrowing model.

His concern was vindicated when the Comptroller and Auditor General said in 2022 that the off-budget borrowings would push KIIFB into a debt trap. Subsequently, the Centre started to deduct KIIFB's borrowings from Kerala's annual borrowing limit.

KIIFB was conceived as an investment tool whose debts would not be reflected in the state's deficit calculations. The Centre's uncompromising stand on off-budget loans has neutralised the very reason for KIIFB's existence, throwing up fundamental questions about the continued utility of KIIFB.

As it stands, KIIFB has approved 1,209 projects worth ₹76,554.53 crore. However, the amount spent till now is only ₹38,621 crore. "This means, in the last nine years KIIFB has pumped in an average of just ₹4,300 crore every year. Such spending could easily have fitted within the state's plan outlay. There is no incentive to persist with KIIFB," a senior Congress leader said. (For 2026-27, Kerala's plan outlay excluding local body devolution is ₹25,401 crore.)

Towards the end of the LDF term, Satheesan had alleged that KIIFB funds were illegally used to boost the LDF's electoral chances.

KIIFB, however, is insulated by law. The annual transfer of budgetary funds - half the motor vehicle tax and the entire petrol cess - to KIIFB is legitimised by the KIIFB (Amendment) Act. "But we require only a simple majority to amend this law," the leader said.

At this point, it is not clear whether Satheesan would hastily order capital punishment for KIIFB. Some of the major infrastructure projects - Kerala Fibre Optic Network, Transgrid 2.0, Coastal Highway, augmentation of water supply projects, and modernisation of schools and hospitals - are done by KIIFB.

Nonetheless, it is certain that the new UDF government will immediately announce a high-level enquiry into the alleged diversion of KIIFB funds for advertisement purposes, particularly during the last year of the LDF government.

Setting a new gold standard
Mining more revenue from gold is another major mission for Satheesan.

In most of his campaign interviews, he had stated with alarm that Kerala still collected a mere ₹600 crore from gold sales. "This, when the gold sales in Kerala are said to be over ₹1 lakh crore," was a constant Satheesan refrain.

World Gold Council figures say that Kerala consumes 200-225 tonnes of gold annually, which is worth approximately ₹36,000 crore. Satheesan wants to collect at least ₹2000 crore annually from gold.

Even senior officials are clueless how. "After the GST came into existence in July 2017, there is no mechanism to track gold sales. I don't know how the Chief Minister has come up with a figure of ₹600 crore," a senior IRS official said.

According to the official, unlike other goods and services, gold trade does not require e-way bills. An e-way bill is an online bill generated for the transfer of goods from one state to another. It is a proof of trade, and such a proof does not exist for gold.

In 2018, when T M Thomas Isaac was the finance minister, he vehemently argued for e-way bills for gold at the GST Council. Finally, an Interstate Ministerial Committee was constituted to study the issue. The report was submitted the next year itself, but it has still not been acted upon.

"Without e-way bills, how is anyone to track the sale of gold. You require authentic sales figures to even think of boosting revenues from it," the official said.

Before the GST era, states could tax the gold trade. Even then, evasion was rampant. Between 2001 and 2006, the average annual tax collection from the sale of gold in Kerala was a paltry ₹21 crore. Raiding jewellery shops was not an option as it led to the accumulation of legal cases.

So in 2007, when Isaac was the Finance Minister, he introduced the compounding system. Under this, every year a jeweller has to pay 150 per cent of the sales tax he had paid the previous year. The system depended on self-compliance, and many traders suppressed their turnover. Yet, by 2011, the state collected ₹600 crore from gold, a nearly 2000 per cent increase in gold revenue in five years.

This was possible because the taxing was done by the state. In 2017, the GST regime snatched the state's right to tax commodities, including gold.

It is felt that Satheesan can do nothing about gold unless he has data. "For this, he has to fight the Centre to get e-way bills introduced for gold," the official said.