Kerala: Loss of Rs 171 crore in 2019-20 dents claims over KIIFB

THIRUVANANTHAPURAM: The balance sheet of Kerala Infrastructure Investment Fund Board (KIIFB) for the year 2019-20 saw red, with the organization recording a net loss of Rs 171.1 crore.
This is the first time KIIFB has registered a loss after a total revamp of the organization in 2016. Interestingly, the Comptroller and Auditor General (CAG) had found serious lapses in KIIFB’s model of availing foreign loans in the audit for the previous year, 2018-19.KIIFB’s audit figures add credence to the concerns expressed by CAG as it paid Rs 362.3 crore towards interest alone on masala bonds, KSFE bonds and other bank loans.
During the three years from 2016-17, KIIFB’s balance sheet registered profits of Rs 6.32 crore, Rs 30.34 crore and Rs 37.88 crore. KIIFB, not envisaged as a profit-making body, had claimed that losses are bound to happen until its limited number of projects—which are expected to churn out revenuebecomes fully operational. However, its losses are set to mount year after year and would be absorbed by the government through budgetary allocation, as mandated under the amended KIIFB Act.
The balance sheet, accessed by TOI, shows that for masala bonds alone (CAG’s main matter of contention), KIIFB paid an interest of Rs 209.25 crore last year. KIIFB had raised Rs 2,150 crore through Masala bonds at a high interest rate of 9.72%, when it could have floated bonds domestically at a cheaper rate.
“Financial risk of Masala bonds, which are tradeable and listed at London Stock Exchange, is that it’s issued at a high rate. KIIFB could have floated bonds under Kerala State Industrial Development Corporation like other states. The rate of interest could have been 7.5 to 8% which is the usual rate of borrowing for other state government-guaranteed bonds,” said a top government official, who had dealt with the matter, on condition of anonymity.
Bodies like Andhra Pradesh Industrial Infrastructure Corporation and Punjab State Industrial Development Corporation had floated bonds at much cheaper rates in which pension funds, insurance companies invested as they are SLR (statutory liquidity reserve bonds). “This market is big; huge amounts of pension, insurance and provident fund money are waiting to be invested in SLR bonds,” the official said.
In 2019-20, KIIFB paid Rs 401.12 crore as interest for Masala bonds, interests loans availed from banks and other financial institutions (Nabard, SBI, Union Bank, Indian Bank, Syndicate Bank), KSFE bond and guarantee commission.
Amid claims by the government that projects worth Rs 60,000 crore were on the roll till March 31 this year, KIIFB has disbursed only Rs 4,736 crore, of which Rs 1,214.4 crore were released for revenue-generating projects and Rs 3,524.6 crore as grants, for projects that would not yield any returns.
Though government and KIIFB were claiming that the management is done in such a way that it will raise money only when required, KIIFB is holding Rs 8,684 crore –raised through Masala bond and term loans – that are deposited as fixed deposits in various banks and mutual funds at lesser interest rates than at which the loans were raised.
“KIIFB is a classic example of financial mismanagement. Losses will naturally accumulate in coming years. In five years, state – being the guarantor for all KIIFB loans– will have to undertake a huge repayment that will be the responsibility of the next government. With hardly any resource for repayment, the next government is going to face a serious financial emergency,” said Congress MLA VD Satheesan