States » SouthPosted at: Oct 15 2026 8:19PM


KIIFB caused Rs 13,103 crore additional burden on Kerala, borrowing limit cut by Rs 25,932 crore: CM

Thiruvananthapuram, Oct 15 (UNI) The Kerala Infrastructure Investment Fund Board (KIIFB) has imposed an additional financial burden of Rs 13,103 crore on the state and led to a reduction of Rs 25,932.55 crore in its borrowing limit, Chief Minister V.D. Satheesan said on Thursday, announcing that the government would implement the recommendations of a committee headed by Sudha Pillai that examined the agency's financial management and functioning.
The committee found serious deviations from constitutional provisions and Rules of Business in KIIFB's operations. The government would seriously consider ordering an investigation into the alleged irregularities, Satheesan told a press conference here.
The report was placed on the table of the Assembly after receiving Cabinet approval.
According to the committee, KIIFB had functioned as an independent entity outside the effective control of the state government and the Finance Department, while its large-scale borrowings had imposed a substantial financial burden on Kerala. Its operations over the past decade had also weakened the administrative systems and capacity-building efforts of government departments, the report said.
The committee estimated that the KIIFB financing model had resulted in an additional expenditure of Rs 13,103 crore. It said the state could have invested more in development projects with greater transparency had the funds been allocated directly through the government budget.
Several projects classified as revenue-generating had failed to generate the expected income, while violations of rules had adversely affected the state's financial position.
The committee identified a reduction of Rs 25,932.55 crore in Kerala's borrowing limit as one of the major consequences of KIIFB's operations.
Between 2021-22 and 2024-25, 99.4 per cent of the funds transferred by the state government to KIIFB were used for loan repayment. Since the borrowings were raised outside the budget, they were not subjected to the same level of legislative oversight and scrutiny, the report said.
It also alleged that KIIFB had sidelined the Finance Department. Although the department had decided against providing guarantees for the borrowings, a meeting chaired by the Chief Minister decided to extend guarantees, according to the report.
KIIFB's borrowing costs were higher than those of the state government, resulting in an additional interest burden of Rs 396 crore annually. The committee estimated the total additional interest expenditure at Rs 1,250 crore and the loss arising from the masala bond issue at Rs 181.73 crore.
Although Section 8(1) of the KIIFB Act required prior government approval for borrowings, the committee found that the provision had not been complied with.
As of September 29, 2026, KIIFB's financing model had resulted in a reduction of Rs 61,678.46 crore in the government's receipts, the report said. Expenditure on infrastructure projects and the fund balance together amounted to Rs 48,574.82 crore, leaving an additional financial burden of Rs 13,103 crore on the state.
The committee also pointed to regional disparities in project allocation. Three districts accounted for 41.6 per cent of KIIFB projects, while Kannur alone accounted for 52.9 per cent of land acquisition expenditure.
KIIFB had approved Rs 12,727 crore for acquiring 5,366 acres in Kannur and Palakkad for industrial projects. Of this, 1,000 acres had been acquired in Kannur at a cost of Rs 2,489 crore, but no industrial activity had begun on the land in the past five years.
Notifications had also been issued to acquire another 3,829 acres in Kannur at an estimated cost of Rs 9,572 crore. The committee questioned the substantial expenditure on land acquisition in the absence of revenue generation.
Despite the state government's sovereign guarantee backing KIIFB, the agency had deposited around Rs 5,821 crore in various accounts, the report said.
The committee found serious discrepancies in publicity and promotional expenditure. While KIIFB's accounts showed Rs 21.16 crore under advertisement and promotion for 2025-26, the actual expenditure under the head was Rs 203.72 crore.
KIIFB had 498 employees despite government approval for only 40 posts. The revision of employees' salary structure had also been carried out without the Finance Department's approval, the report said.
Kerala would require Rs 70,415.54 crore in the coming years to repay KIIFB loans and complete ongoing projects, excluding land acquisition costs. The repayment burden would continue until 2041-42, creating substantial financial pressure on the state, the committee said.
The committee, comprising Sudha Pillai, Tarun Bajaj, Shyam Srinivasan, Nilesh Vikamsey and Subbalakshmi Narayan, recommended a Comptroller and Auditor General (CAG) audit of KIIFB's 10 years of operations and a complete halt to its market borrowings.
It also recommended that funds for debt repayment be provided through the state budget, high-interest loans be replaced with lower-interest borrowings, and funds be allocated in the budget to complete ongoing projects.
If the state government takes over KIIFB's debt, the escrow arrangements involving motor vehicle tax and cess should be discontinued, the committee further recommended.
UNI DS
Tags: #KIIFB caused Rs 13#103 crore additional burden on Kerala# borrowing limit cut by Rs 25#932 crore: CM
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