A row over the Comptroller and Auditor General (CAG) audit of KIIFB operations has erupted again in Kerala as the state finance minister Dr Thomas Isaac has alleged that the CAG is trying to scuttle the development of Kerala by scheming with RSS-led forces in Delhi.
On November 14, Isaac had alleged that he has seen the draft report of CAG’s KIIFB audit, which has remarks alleging violation of the Indian Constitution in connection with taking loans.
“Auditor is Watchdog, not a Blood Hound,” he posted on his official Facebook page even before the final report has been placed in the Kerala Assembly.
Already Kerala Opposition parties have alleged that Isaac talking openly about a CAG report which has not yet been placed in the Assembly is in itself a violation.
“Isaac should step down. He has breached Assembly privilege,” VD Sateeshan, Indian National Congress leader and MLA, told The Lede.
According to Isaac, the CAG has mentioned in the report that “KIIFB has taken foreign loans violating the Indian Constitution Article 293 (1).”
Sections 1 to 4 of Article 293 deals with borrowing by state governments and its permission required from the central government.
In 2019, KIIFB had taken Rs 2150 crore Masala Bond from London Stock Exchange at an interest rate of 9.723%.
Masala Bond Was Opposed
Interestingly, The Lede has found that the KIIFB’s Masala Bond was opposed by the then chief secretary Tom Jose and finance secretary Manoj Joshy.
The Masala Bond was included as the 14th agenda in the 34th general body on October 02, 2018.
KIIFB CEO Dr KM Abraham sought permission of KIIFB to accumulate funds by issuing a Masala Bond in the London Stock Exchange.
Joshy had asked in the meeting why they should issue Masala Bond for a high-interest rate when it is possible to raise funds by issuing a bond for a less interest rate within the country.
And Jose had asked why the interest rate of the Masala Bond remains high while the interest rate is generally low in the foreign markets.
However, KIIFB members Sushil Khanna and RK Nair supported the Masala Bond and suggested proceeding with issuing the same.
Minister Isaac had said that though the interest rate is high, the opportunity to enter a foreign market can be utilised, and this will benefit the KIIFB in the long run.
KIIFB Corporate Body
On November 14, responding to CAG’s audit report, Isaac had posted on his FB page and had said to the media that “KIIFB is a Corporate Body and it doesn’t have to take permission from the central government to take foreign loans.”
And on November 15, Isaac alleged that “the CAG report on KIIFB came about after RSS leader Ram Madhav’s green signal to move against KIIFB.”
During a press conference, Isaac said Madhav – a leader of the Sangh Parivar outfit Swadeshi Jagran Manch – gave the nod after a meeting of its leaders at Ramanilayam in Thrissur.
“The move is aimed at destroying the state’s development by sabotaging the functioning of KIIFB. And Indian National Congress leader Mathew Kuzhalnadan is implementing the united agenda of BJP-Congress to destroy the constitutional organisation. The people of the state are realising the motive behind the move,” Isaac said.
Responding to Isaac’s allegations, Kuzhalnadan said that all the allegations are baseless, adding that Isaac should tell people what he will do if he fails to prove his allegations against him.
Repeating Draft Report Claim
Interestingly, on November 14, 15 and even on 16 till afternoon, Isaac was repeating that what he had seen is a draft report.
But on November 16 evening, a CAG note dated November 11 was leaked putting Isaac on the backfoot. The leaked note revealed that “On November 6, the final report of 2018-19 audit on KIIFB operations was submitted to the Kerala government.”
Following that, on November 17 at 11 am in Alappuzha, Isaac told the media that observations in the CAG report was the problem and not whether it was a draft version or the final report.
“Whether the CAG report is a draft or final is not the problem, but its observations are. The arguments raised by the CAG and the effect it will have on Kerala’s development is the problem,” Isaac said.
Isaac reiterated his question to the Congress-led Opposition to reveal their opinion on the matter.
“The CAG report will hinder Kerala’s development projects. The CAG has not held any discussions with the government over the report. Hence, I thought it was a draft and said so the last time around. How can they prepare the final report without discussing it with the government?” Isaac questioned.
“The final report is different from the draft report. Matters mentioned in the new report in 4 pages, were not in the earlier report. There wasn’t a 4-page section that pointed out that loans should not be taken. This was added later in Delhi. There is a huge conspiracy against Kerala,” Isaac alleged.
Isaac repeated that KIIFB is a corporate body and its debt will not become a liability for the state.
Meanwhile, an affidavit filed by the Accountant General’s office before the High Court said that from 2015-16 to 2018-19, KIIFB received Rs 6008 crore for implementation of various projects, and of that, Rs 1923.91 crore has been spent for various projects.
The affidavit was filed by the Senior Deputy Accountant General (Admin), the office of the Accountant General (G&SSA), Kerala, Thiruvananthapuram in June 2020 in response to a petition filed by MR Ranjith Karthikeyan through Kuzhalanadan challenging the constitutional validity of the issue of Masala Bonds to overseas investors by the state government and listing them on the London Stock Exchange.
The affidavit said the CAG is a constitutional authority and the reports prepared by it are laid before the Parliament or appropriate legislature as per Article 151 of the Constitution.
As per the procedures and Rules of Business of Parliament, the CAG report is referred to the Public Accounts Committee or Committee on Public Undertakings for deliberation by representatives of the electorate.
Therefore, the CAG is a key constitutional figure that acts as an instrument ensuring Parliamentary accountability of the executive in all matters involving finance and police, the affidavit said.
The KIIFB was formed under the 1999 Act as a statutory corporate body.
A statutory corporation is a corporation set up by the state, which might be ordinary companies/corporations owned by a government with or without other shareholders, or they might be a body without shareholders that is controlled by the national or sub-national government to the extent provided for in creating legislation.
Talking to The Lede on the corporate body’s nature, Joseph C Mathew, a political observer in Kerala, said that by giving free hand for KIIFB to implement developmental projects, the Left government in Kerala has violated the mandate given to the democratic government.
“We entrusted the MLAs and the government to work for us, not a corporate body, which is not bound to answer to the elected government,” Joseph said.
Following Modi Policies
Meanwhile, PJ James, a member of the CPI (ML) Red Star Politburo, said that by raking up the unnecessary row over the CAG audit report in KIIFB, the Left government is trying to ‘establish’ that they are against the liberal policies of the Narendra Modi government.
“The Left government is following the footsteps of the pro-Corporate Modi government,” James said.
“The Modi government had set up a board named National Infrastructure Investment Fund Board (NIIFB), a collaborative investment platform for international and Indian investors, anchored by the Indian government. KIIFB is a replica of the same. Pinarayi government is following the same libearisation policies,” he said adding that Kerala will be pushed deep into a debt trap through this KIIFB.
According to a White Paper published by the state government in 2019, the state’s public debt rose from Rs 1.5 lakh crore in 2016 to Rs 2.5 lakh crore in three-and-a-half years.
The document had said the per capita public debt increased from Rs 46,078 to Rs 72,430 during the period.
KIIFB is aiming at an investment of Rs 50,000 crore in the state.
A few major projects are Kerala Fibre Optic Network, Petrochemical and Pharma Park in Kochi, Coastal and Hill Highway, Transgrid 2.0, Life Science Park in Thiruvananthapuram, and Hi-Tech School Programme.