Is Centre Targeting Kerala Infrastructure Investment Fund Board Through ED?

Ahead of the Kerala Assembly elections on April 6, Central investigative agencies have started zeroing in on the Left Democratic Front (LDF) government. The target is the Kerala Infrastructure Investment Fund Board (KIIFB) that funded developmental activities that have changed the face of the state.

Chief Minister Pinarayi Vijayan has, however, accused the Union finance minister, under whose ministry the ED falls, of trying to destroy KIIFB by raising baseless allegations against it and misusing the Enforcement Directorate (ED) for political purposes.

Finance Minister T M Thomas Isaac, too lashed out at Sitharaman, saying the ED, probing the state-owned agency’s external borrowings through ‘Masala Bonds’ had made attempts to threaten state government officials after summoning them to their office.

On March 2, the ED had summoned two top KIIFB officials to appear before it in connection with its probe into the state-owned agency's external borrowings through "Masala Bonds", official sources said. The notices were issued to KIIFB Chief Executive Officer (CEO) and deputy CEO directing them to join the probe next week, the sources said.

The ED is probing whether KIIFB violated provisions of the Foreign Exchange Management Act (FEMA) in its external borrowings through "Masala Bonds".

The agency also took note of a Comptroller and Auditor General (CAG) report on Kerala finances, tabled in the Assembly in January this year, for launching its probe against the top KIIFB top. In its report, the CAG had criticised KIIFB's external borrowings through ‘Masala Bonds’, saying these were not in accordance with the constitutional provisions and lacked legislative approval.

The CAG report alleged that the approval given by the Reserve Bank of India (RBI) to KIIFB to issue the ‘Masala Bonds’ was questionable because the permission allowed the state government to route its own foreign borrowings through the state-owned institution.

"If this model were to be followed by other states as well, then the external liabilities of the country would increase substantially, without the central government even knowing that such liabilities are being created," the report had said.

Masala bonds are specialised debt instruments issued outside India but denominated in Indian rupees, rather than the local currency.

It may be noted here that Kerala’s development initiatives, through KIIFB, have made a mark, as per various independent reports. This is despite the Bharatiya Janata party-led Central government cutting Central funds, tax shares and budget layers for states.

KIIFB has so far approved funding for projects worth Rs 60, 102 crore, covering vital sectors like healthcare, education, transportation, water and power supply. It has funded more than Rs 20,000 crore worth projects in 2020-21, as per the state budget.

Vijayan’s remarks follow comments made by Union Finance Minister Nirmala Sitharaman during her visit to Kochi to this week to attend a BJP event. "I don't know what budget-making is this when all the money is given to one KIIFB. What is this organisation? We also make a budget in the Union government. We don't give all money to one particular agency and say, ''we'll see'', she had said.

The ED’s move followed soon after Sitharaman’s comments.

The chief minister also accused the Union finance minister of trying to "destroy" KIIFB by raising "baseless allegations" against it and "misusing" the ED under her ministry for political purposes.

"Union finance minister Nirmala Sitharaman, who is also a senior leader of the BJP, is raising baseless allegations against KIIFB which ushers in unprecedented development in the state", Vijayan told reporters.

"Some investigators of the central agency are now showing undue hastiness to implement their political bosses' orders," he added.

The chief minister, along with the state finance also pointed out that even before the KIIFB officials received the summons from the ED, the news was leaked to the media.

"This was aimed at creating a special kind of political atmosphere in the state ahead of elections,” Vijayan  said.

In the ED probe against KIIFB, there were even attempts to threaten state officials and thus make them give statements according to the demands of the political big bosses at the Centre, he alleged.

"The investigators had taken a stand that they would not even mind physically assaulting the state officials. But the Central agencies should keep in mind that there are laws in this country to resist such unwarranted moves. Rule of law still persists in this land," Vijayan said.

There was a complaint that ED officials had behaved in an improper manner with the KIIFB personnel, Vijayan said, adding that: "Naturally, it would invite legal action. Everyone has the right to lodge a complaint. Naturally, the authorities concerned would take action in this regard. The central agencies cannot act according to their whims and fancies."

The chief minister said: "We have even sent a letter to the Prime Minister explaining this. On whose behalf are they (ED) acting like this? Is it for the party ruling at the Centre or for the opposition Congress which endorses whatever the saffron party says."

Vijayan, who has written to the Election Commission on Wednesday, March 3, against the ED probe during the time of elections, on Thursday said: "The model code of conduct is already being in force in the state. But, certain things are happening here against its rules and norms."

(With Inputs from PTI)