Thiruvananthapuram: The huge borrowings made by Kerala Infrastructure Investment Fund Board (KIIF-B) will not necessitate the imposition of tolls, cesses or surcharges to ensure repayment. Finance minister Dr T.M. Thomas Isaac said that KIIF-B, which will facilitate investment of at least Rs 50,000 crore in the state in the next five years, was devised as a self-sustainable model. The share of the state’s motor vehicles tax and one percent cess on petrol, envisaged as KIIF-B’s future revenue streams, would be more than enough to pay off its debts.
Dr Isaac was replying to the general discussion on the budget in the Assembly on Wednesday. The minister presented a “worst-case scenario” (where funds are borrowed at 9.5 per cent interest with a three-year moratorium and a repayment period of seven years) to demonstrate the sustainability of KIIF-B. (Isaac said foreign funds could easily be secured at less than two per cent interest, and with a repayment period of 30 years.)
Here is Isaac’s estimate of KIIF-B expenditure till 2020-21, the last fiscal of the Pinarayi government, in the “worst-case scenario”. 2017-18: borrowing –'5000 crore; annual interest – Rs 1345 crore; total outgo –Rs 9412 crore. 2018-19: borrowing -Rs 10,000 crore; the annual interest - RS 2689 crore; total outgo - Rs 18,824 crore. 2019-20: borrowing -Rs 20,000 crore; annual interest -RS 5378 crore; total outgo -Rs 37,647 crore. 2020-21: borrowing – Rs 15,000 crore; annual interest – Rs 4034 crore; total outgo – Rs 28,236 crore. In short, an investment of Rs 50,000 crore in five years will necessitate a repayment of Rs 94,119 crore.
In the “worst-case scenario” model, repayment is scheduled to end in 2031-32. Now, here is the revenue side. (Assumption is motor vehicle taxes and petrol cess will grow at 15 percent annually.) At the moment, KIIF-B has '1643 crore (from motor vehicle tax and petrol cess.) In 2021-22, Rs 3974 crore will flow in. In 2027-28, it will be Rs 8348 crore. In 2031-32, it will be Rs 15,116 crore. Taken together, KIIF-B will have in its coffers '94,980 crore, funds more than enough to take care of its expenditure (Rs 94,119 crore).
Isaac said that it was the promise of this future cash flow that would attract money to KIIF-B. In accounting jargon he described the model thus: “It is the securitisation of our future income flow.”
