Notwithstanding recent disasters, KIIFB has been pushing projects, counting on money from NRIs.
A triple whammy of disasters may have downshifted Kerala’s Rs 50,000-crore infrastructure creation drive a bit, but that is not on account of money. For, even as the effects of the economic slowdown are being felt, the distressed state’s 20-lakh-strong diaspora is likely to be its white knight, putting in money for infrastructure creation through the Pravasi chit funds that have been launched.
“Till last week, we had sanctioned Rs 45,380.37 crore for 588 infrastructure projects. Of this, Rs 14,275 crore was for land acquisition alone,” Dr KM Abraham, CEO, Kerala Infrastructure Investment Fund Board (KIIFB), a mechanism set up to mobilise funds for infrastructure creation from outside state revenue, told FE recently.
For Kerala, calamity struck first as Cyclone Okhi in 2017 end, being followed by floods in August 2018 and, more recently, in the form of monsoon-triggered landslides in the Northern belt.
Following the floods in 2019, the state encountered donor fatigue, with the much-lauded public response to relief and rehabilitation during last year’s floods being visibly absent. But KIIFB, propelled by NRI backing for its masala bonds—floated on the London Stock Exchange in March this year—and Pravasi chit funds, rose to the post-disaster situation, offering what came like a recession-era stimulus package. In July this year, the state cleared a plan to set up a diaspora investment company with a 74% stake for non-resident Keralites and a 26% government stake. This PPP company would fund infrastructure projects and NRI townships. In the long term, KIIFB is toying with innovative instruments like diaspora bonds and dollar bonds.
While Finance Minister Thomas Isaac had pegged the collection from Pravasi Chitty in 2019 at Rs 25,000 cr, it has picked up less than Rs 100 cr so far. This may be because it was launched in the Gulf nations only in July, with the pace expected to pick up from now on.
“While there’s no cashflow slowdown, the execution of projects has been not fast enough,” Isaac admits. Out of the 588 projects approved, only 228 projects have got off the ground yet. “The main hurdle was the lack of skilled manpower and so 200 engineers have been appointed in the PWD. Projects worth Rs 30,000 crore will get going by this year-end,” he says.
In August, KIIFB augmented budgetary support for the State’s KFON (Kerala Fibre Optic Network) with an extra Rs 700 crore. In the highway sector, after the National Highways Authority of India (NHAI) highlighted the high land acquisition costs, the KIIFB has offered to pitch in with 25% of the land costs of its Kerala projects. Besides elevated flyovers and regulator-cum-bridges, the body is focusing on drinking water projects. Late late month, the KIIFB decided to fund 39 new infrastructure projects worth Rs 1,745.5 crore.
While the KIIFB experiment is being studied as a model by other governments, there is need to expedite the ongoing projects if they are not to suffer cost-escalation, experts say. And, even as the planners are right about there being no cash crunch for infrastructure creation, not matching the cash-flows with project pace could push the state down a debt precipice. That could well evoke the rage of the NRI investor who has staked his hard-earned money on Kerala’s infrastructure dreams.