Thiruvananthapuram: Finance minister Dr Thomas Isaac, after waxing eloquent about KIIF-B’s (Kerala Infrastructure Investment Fund Board) potency to attract investments to the tune of Rs one lakh crore in five years, has now spoken of the need for a “clear exit strategy”. “We cannot go on borrowing using the KIIF-B. We also need a clear exit strategy,” the finance minister said while replying to the discussion on the Budget in the Assembly on Wednesday.
However, Isaac’s exit strategy depends on an unprecedented increase of 25 percent in tax revenue growth. “By the fourth year, if not zero, we will bring down revenue deficit very close to zero,” Isaac said. Meaning, the state’s committed expenditures like salaries, pensions and interest will, four years from now, be met from its revenues. “Then we will use of the market borrowings (the '20,000-odd crores annually approved by the RBI that is now used up for committed expenditure) to retire KIIF-B’s commitments,” the finance minister said.
The exit strategy was also a clear hint that a share of motor vehicles tax and the whole of petrol cess Isaac will offer as guarantee will not be enough to meet even the interest requirements of the massive off-budget borrowings using KIIF-B.
Isaac said that the state was already resorting to such borrowings. “How do you think work on Kochi Metro is being carried out,” he asked. “By getting funds from Japan,” he said. However, he cited two problems. One, an investor will have to be identified. Two, such an investor will have prohibitive conditions, which will have to be negotiated. “This will take time, even years,” Isaac said.
Isaac said that the money market was now flush with floating money, in the hands of high net-worth individuals, companies and mutual funds. “They are not interested in tying up their funds with any particular projects. That is where bonds come into play. They give interest and can be sold any time,” Isaac said.
He said the concept was first mooted in K M Mani’s 2015-16 Budget, the one he was not allowed to read. Mani had then said that Kerala Infrastructure Investment Fund Act will be amended to bring in an investment of Rs 25,000 crore. “Now we are aiming for Rs one lakh crore. That’s the only difference,” Isaac said.
