DEVELOPMENT MANAGEMENT AND

FINANCING
Example for a best practice in financial resource
mobilization at local level : A case of KIIFB

Saranga.S.J #17 M3, Urban Design CET

04-Oct-17
 KERALA INFRASTRUCTURE INVESTMENT FUND BOARD

Government of Kerala is poised for accelerated investment in Infrastructure for ensuring

sustainable growth in the economy. To finance critical and large infrastructure projects the
Government intends to mobilize funds both in the medium as well as long term. Government
has approved a plan to issue General Obligation Bonds against unconditional Government
guarantee and Revenue Bonds with structured payment mechanism for medium term
requirement and has initiated steps to raise funds to meet long term requirements through
Alternative Investment Funds (AIF), Infrastructure Investment Trust (InVIT), Infrastructure Debt
Fund (IDF) and build the institutional framework needed for this. In this new scenario KIIFB has
been restructured to act as the key Special Purpose Vehicle (SPV) for mobilising and channelling
the funds to the various infrastructure SPVS. KIIFB through its well organised and professional
approach will act as the key arm of Government to facilitate planned, hassle-free and sustained
development of both physical and social infrastructure ensuring all round well being and
prosperity in the State.

OBJECTIVES AND FUNCTIONS OF KIIFB

The Fund was established with the main objective of providing investment for projects in the
State of Kerala in sectors like Transport, Water Sanitation, Energy, Social & Commercial
Infrastructure, IT and Telecommunication etc. KIIFB will assist the Government and its agencies
in the various aspects pertaining to Infrastructure Development and will act as the nodal agency
for scrutinizing, approving and funding major infrastructure projects including PPP projects.
With the restructured and rejuvenated KIIFB the future looks bright for the development of key
infrastructure in Kerala.
FINANCIAL RESOURCE MOBILIZATION BY KIIFB

To execute the slew of projects proposed in the last two budgets by mobilizing funds through
the Kerala Infrastructure Investment Fund Board (KIFB), the LDF government faces an uphill
task of raising extra-budgetary resources worth Rs 40,000 crore.

This amount is equal to 33 percent of the estimated total expenditure for the fiscal 2017-18.
Despite widespread apprehensions over the viability of the plans to raise such a huge amount
outside the budget through KIIFB, finance minister Thomas Isaac has exuded confidence about
the potential of the alternative method which will act as the prime Special Purpose Vehicle
(SPV) for mobilizing and channeling funds to various infrastructure projects.

Schemes worth Rs 40,000cr

Last November, the government had granted approval to projects worth Rs 4,000 crore under
KIIFB. The total outlay of projects scheduled to be cleared by March end has been estimated at
Rs 11,000 crore, while the KIIFB projects announced in the recent Budget are worth Rs 25,000
crore, taking the total funds to be mobilized through KIIFB to Rs 40,000 crore. A majority of the
proposals approved by the Cabinet are in tendering stage. It is anticipated that the execution of
all these projects will be delayed further.

Fund mobilization
So far, the total amount collected via cess on fuel and motor vehicle registration charges has
reached Rs 2,000 crore. Bonds will be issued to raise more extra-budgetary funds. The
estimated amount to be mobilized via the Kerala State Financial Enterprises (KSFE) NRI chit
funds is Rs 12,000 crore.
In total, the government is looking to raise as much as Rs 50,000 crore in five years with the
help of these specific resource mobilization means. Though the proposals under KIIFB were
announced in the Budget, they will remain outside the budgetary framework for the very
reason that the funding will be done via extrabudgetary sources.
The execution
The idea is great and ambitious, but it is to be seen how the government which is grappling
with an acute financial crisis is going to mobilize such a huge fund through an innovative
method like KIIFB.
The government has roped in former Comptroller and Auditor General (CAG) of India Vinod Rai
to head the KIIFB advisory commission in a bid to the boost the states image as an investor-
friendly destination. The chief minister also has high hopes on KIIFB, especially after the idea
received appreciation and positive feedback from his financial advisor Gita Gopinath.

Coping with failure

The government has earmarked Rs 2,000 crore for the renovation of district, taluk and general
hospitals, Rs 100 crore for setting up modern abattoirs, Rs 500 crore for upgrading schools with
more than 1,000 students, Rs 1,000 crore for providing free internet facilities, Rs 6,500 crore for
630-km long coastal highway, and Rs 3,500 crore for 1,267-km hill highway covering nine
districts.
All these ambitious targets in infrastructure and social sector development are expected to be
met through KIIFB. If the attempts to mobilize the required funds to meet these long-term
requirements fail, it will definitely upset the growth plans envisaged by the present government
for the next five years.