ED probe into Kerala govt body causes a flutter: state FM Thomas Isaac

By: |
March 4, 2021 3:30 AM

Kerala is a state with a high revenue deficit, gets revenue deficit grants from the Centre. KIIFB has had a pivotal role in mobilising funds for infrastructure development from avenues outside the state's revenue and central transfers.

During her recent visit to the state Union Finance Minister Nirmala Sitharaman had questioned the role of the KIIFB in Kerala budget-making.During her recent visit to the state Union Finance Minister Nirmala Sitharaman had questioned the role of the KIIFB in Kerala budget-making.

The Enforcement Directorate’s probe into the overseas borrowings by Kerala Infrastructure Investment Fund Board (KIIFB) has turned into a political slugfest with the Kerala finance minister Thomas Isaac calling it a politically motivated move to sabotage the development of the state.

Isaac dared the central government to do what it could with KIIFB while addressing the media after Enforcement Directorate (ED) summoned two KIIFB top officials to seek clarity over external borrowings by the incorporated entity, which is an off-budget vehicle to finance critical infrastructure projects in the state.

Earlier, the Comptroller and Auditor General of India had raised questions about KIIFB’s rupee-denominated overseas borrowings.

Kerala is a state with a high revenue deficit, gets revenue deficit grants from the Centre. KIIFB has had a pivotal role in mobilising funds for infrastructure development from avenues outside the state’s revenue and central transfers.

It is reported that ED has issued notices to the KIIFB chief executive officer (CEO) and deputy CEO directing them to join the probe. The ED is probing whether the KIIFB violated provisions of the Foreign Exchange Management Act (FEMA) in its external borrowings through ‘Masala Bond’.

Isaac said there were clear guidelines for borrowing under FEMA and any ‘body corporate’ (as KIIFB) can take a loan from abroad with the approval of the regulator RBI. “The ED’s move is a violation of rules during the time of polls. The Union finance minister herself is leading the blatant violation of the code of conduct. Any attempt to derail the state’s development would be resisted with the support of people,” he added.

During her recent visit to the state Union Finance Minister Nirmala Sitharaman had questioned the role of the KIIFB in Kerala budget-making.

The CAG report had said that the loans were taken by bypassing the cap set on external borrowings and that was done by flouting Constitutional norms. The report also expressed concerns that the loans would finally end up as a state liability.

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