Keralam's Fiscal Woes: Status Report Reveals Structural Stress

The 'Status Report' by the UDF government reveals Keralam grappling with extreme fiscal challenges, including a staggering debt of Rs 5.07 lakh crore and KIIFB's parallel fiscal role. The report highlights unjustified regional fund distribution and calls for audits and restructuring to address the state's financial quagmire.

A comprehensive 'Status Report' released by the newly elected United Democratic Front (UDF) government under Chief Minister V D Satheeshan reveals Keralam's fiscal health is under severe 'structural stress'. The report singles out the Kerala Infrastructure Investment Fund Board (KIIFB) as a 'parallel fiscal authority', holding the state accountable for Rs 56,000 crore in financial obligations. These consist of Rs 21,000 crore in unmet loan liabilities and Rs 35,000 crore needed for upcoming projects.

Authored by a committee led by former Cabinet Secretary K M Chandrasekhar, the report highlights Keralam's struggle with an overwhelming debt of Rs 5.07 lakh crore and accrued payment arrears of nearly Rs 48,733 crore. It recommends a forensic audit of KIIFB and a possible overhaul of its constitutional structure. Established in 1999, KIIFB was revamped in 2016 as the state's main channel for infrastructure funding, securing resources through innovative market methods.

The report criticizes the uneven distribution of funds, noting a concentration in districts like Kannur, Thiruvananthapuram, and Ernakulam, which collectively account for almost half of KIIFB's total expenditure. This skewed allocation lacks clear economic justification. The report further mentions KIIFB's higher borrowing costs—which are between 1% and 1.5% more than that of the state government—leading to a Rs 420 crore excess interest burden annually. It also raises issues about the transparency and high costs of the 2019 Masala Bond issuance.