Finance Minister K N Balagopal has compounded the confusion surrounding SilverLine. First he said the government would stand guarantee for the semi high speed rail project but later, when confronted by former opposition leader Ramesh Chennithala, he sounded unsure.
To begin with, Balagopal told the Assembly on Wednesday that Kerala Rail Development Corporation Ltd (K-Rail), the special purpose vehicle formed to implement the semi high speed rail project, has the sovereign guarantee of the state to seek assistance from foreign lending bodies.
“Such loans taken by the K-Rail will impose no liability on the state,” Balagopal said. Meaning, K-Rail will pay back its loans from the revenue it generates from its operations. Only in the "unlikely" event of K-Rail finding it impossible to finance its debt will the state government step in. When a government stands guarantee for a project it is normally presumed viable. Sovereign guarantee is just an additional assurance to lenders.
Opposition leader V D Satheesan had doubts about the viability of the project. He wanted to know whether Kerala could stand guarantee for such a huge amount. “Already, the Centre and the Railways have said that they would not stand guarantee,” Satheesan said. Besides, he said that the present estimate of nearly Rs 64,000 crore was just a random figure arrived at before completing the alignment of the project or preparing a proper estimate or even knowing from where the natural resources required for the project were going to be sourced from.
“In 2018 itself, the NITI Aayog has estimated the project cost to be Rs 1.33 lakh crore. Now, the cost would have escalated to Rs 1.60 lakh crore,” he said and asked the finance minister: “Can the state take on such a massive liability?”
Balagopal seemed to have no doubts whatsoever. He said that the SilverLine project has been vetted by the Niti Aayog, Railways and the expenditure wing of the Finance Ministry and has been sent for approval to the Department of Economic Affairs. The DoEA will now have to recommend the project to foreign lending agencies like Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB) and KfW (Germany-based development bank).
“These banks will provide assistance only if they are confident that they will get their money back. No one is going to give money for a project bound to fail,” he said.
To drive home the long-term viability of SilverLine, the minister gave the example of Travancore's first metre gauge that started from Kollam and passed through Shencottah to Chennai over a century ago. “Did the princely state start this railway line thinking that it would get back all the money it had invested quickly. Had the rulers then been dissuaded by the huge cost would we have had a highly developed rail network now,” he asked.
It was then that Chennithala stepped in. Unlike Satheesan, he was not bothered about the potential danger involved in the state guarantee. He questioned the LDF's very commitment to the SilverLine project.
When Chennithala asked whether Kerala had consented to stand guarantee for K-Rail, Balagopal gave a vague non-committal reply though just a few minutes ago he had told the house in very clear terms that Kerala would stand guarantee. “We have given the opinion that we would stand guarantee,” the minister said, sounding as if sovereign guarantee was just in the discussion stage.
At this point, Chennithala said that he was in possession of documents that showed that the state government, contrary to what the minister said earlier, had not officially consented to stand guarantee for the SilverLine project.
The thrust of Chennithala's argument was that Kerala was not in a position to stand guarantee even at this stage when Kerala had no choice but to somehow find external funds for the project. Extended further, Chennithala's argument meant that no funding agency worth its name would be willing to provide assistance without a sovereign guarantee. In other words, since the Centre and the Railways have already backed out, the Silverline project is as good as dead.
Quoting from official files, Chennithala said that the Finance Department itself had said that the government had no space at the moment to provide sovereign guarantee. A state government can stand sovereign guarantee for not more than 5% of the GSDP.
Chennithala said that the finance minister had approved a note by the finance secretary that says that the state would try for an amendment of the sovereign guarantee statute after the Centre gave its sanction for the Silverline project.
