Fiscal stimulus for flood-hit Kerala: Work on KIIFB projects worth Rs 30,000cr to begin this FY

During a two-day meeting held on August 19 and 20, Kerala Infrastructure Investment Fund Board (KIIFB) has approved 36 projects and two sub-projects worth Rs 1745.496 crore. With this the value of the total approved KIIFB projects stands at Rs 45,380.37 crore. The target is Rs 50,000 crore.

Finance minister T M Thomas Isaac said work on projects worth Rs 30,000 crore would begin by the end of the 2019-20 fiscal. And by the end of the 2020-21 fiscal, the fag-end of the Pinarayi Vijayan government, work would begin on all the projects that would together constitute an investment of Rs 50,000 crore. However, completion of some of these projects may take another five to 10 years.

Work on projects worth Rs 7,000 crore has already begun. Tenders have been invited for another Rs 10,600 crore worth of projects. The finance minister said the state's grant, in the form of a share of the motor vehicle tax and the entire revenue from petrol cess, would be enough to meet the interest requirements of the KIIFB projects.

The KIIFB has drawn up a timetable of repayment for the KIIFB using the most modern ICT (Information and Communications Technology) tools. According to this, an investment of Rs 50,000 crore in five years will necessitate repayment of Rs 94,119 crore. The timetable, which is prepared for a worst-case scenario, shows that the whole of petrol cess and half the motor vehicle tax the KIIFB would receive yearly will be good enough to repay the total outgo of nearly Rs 95,000 crore.

Repayment is scheduled to end in 2031-32. At the moment, KIIFB has Rs 1,643 crore (from motor vehicle tax and petrol cess.) After taking into account the petrol cess and the share of motor vehicle cess that will owe to KIIFB and the interest that will accrue, the KIIFB will have Rs 3,974 crore in its kitty by 2021-22. By 2027-28, it will be Rs 8,348 crore. Finally, in the last repayment year of 2031-32, the KIIFB will have Rs 15,116 crore.

When all the yearly amount in KIIFB's coffers are added (from 2016-17, when the government had begun diverting petrol cess and motor vehicle tax to the KIIFB, to the final repayment year of 2031-32), KIIFB will be in possession of Rs 94,980 crore, funds more than enough to take care of its expenditure (Rs 94,119 crore).

There is yet another layer of cushion. Thomas Isaac said at least 25 per cent of the projects- like K-Fone (Kerala Fibre Optic Network) and Transgrid - are revenue generating. In the case of these projects, every penny spent can be recovered.

Isaac said the successive floods that have ravaged the state would not stand in the way of the KIIFB projects. “The KIIFB projects are the stimulus package for our flood-battered state,” the finance minister said.

Nonetheless, Isaac was concerned about the tardy progress of the KIIFB projects. “The implementation of the KIIFB projects has not acquired enough speed,” he said. He very nearly conceded that it was a case of putting the cart before the horse. “Many implementing agencies like Inkel (the special purpose vehicle to carry out industry projects ) and Road Fund Board (the designated SPV for Public Works Department projects) do not have the capability to take up large projects,” Isaac said.

Focus, therefore, is on capacity building. Isaac said 200 additional engineers would soon be posted in the PWD. “Besides, the KIIFB will also be providing special technical assistance to various implementing agencies,” Isaac said.

The PWD has cornered the largest chunk of KIIFB funds till now: Rs 11,936.42 crore. Water Resources gets the next big chunk: Rs 4753.21 crore. Health and family welfare is the third big beneficiary: Rs 2035.996 crore.