White paper on Kerala finances calls for overhaul of KIIFB, forensic audit of accounts

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A white paper presented at a rally in Kerala on Thursday by Chief Minister VD Satheesan recommended a thorough review of the Kerala Infrastructure Investment Fund Board (KIIFB), saying that the “basic premise of the institution has been undermined”.

The White Paper recommended a redrafting of the KIIFB Act 2016 and a forensic audit of KIIFB accounts. However, it would be a “waste” to dismantle the KIIFB framework, which has built up valuable capabilities over the years, noted the paper, “Kerala’s Fiscal Health: A Status Report”. These capacities should instead be absorbed or made available to government ministries to improve the quality of project preparation and implementation.

“The question is no longer whether KIIFB should continue in its current form – the decision of the Comptroller and Auditor General (CAG) has effectively answered that. The question is how to manage the transition: meeting commitments, maintaining institutional capacity, adjusting the legal framework and ensuring that accumulated costs are transparently accounted for and prudently managed in the coming years,” the document said.

The White Paper does not recommend the continued redirection of government revenues to an escrow account. Instead, KIIFB should be directed to use budgetary loans to meet its obligations, he said. Furthermore, KIIFB should not be allowed to borrow independently from external sources. The finance department should borrow on more favorable terms and channelize funds to KIIFB to meet its financial obligations.

The paper, prepared by a committee headed by former union cabinet secretary KM Chandrasekhar, described KIIFB as “a bold institutional innovation – an attempt to create a professionally managed, market-oriented provider of infrastructure finance that could bypass the fiscal constraints binding the state budget”. However, its basic premise is now being undermined, he noted.

The White Paper states that KIIFB’s borrowings are now government borrowings and that the cost of funding it is consistently higher than government borrowing rates. “Its allocation of projects reflects political rather than strategic priorities. And the state faces a combined liability of around ₹ 56,000 crore in loan repayments and project financing obligations – a burden whose full weight is only beginning to be felt,” the White Paper said.

Interesting point about allocation

The White Paper contains an interesting note on how KIIFBs are allocated. The document says that KIIFB’s prioritization and distribution track record in terms of projects raises “serious questions”. Kannur district alone accounts for more than 20% of the total approved amounts and 19% of released payments.

“Adding Thiruvananthapuram (17% approved, 17% released) and Ernakulam (11% approved and released), the three districts absorb almost half of the total. Neither human development nor economic need indices provide an apparent justification for this concentration,” it said.

Published – 04 Jun 2026 10:53 IST