The Law Enforcement Directorate has reportedly opened a preliminary investigation to examine whether Kerala Infrastructure Investment Fund Board (KIIFB) borrowing in foreign markets “to stimulate development” in Kerala violated the provisions of the Asset Management Act. changes (FEMA).
Official sources said the audit was based on the Comptroller and Auditor General’s (CAG) conclusion that the KIIFB raised ₹ 2,150 crore on the international market without the consent of the central government.
The CAG also pointed out that the KIIFB had exceeded its legal limits by issuing masala bonds to raise funds in foreign markets in violation of article 293 (1) of the Constitution.
Only the central government could guarantee debt instruments issued by public entities in foreign financial markets. The ED reportedly wrote to the Reserve Bank of India (RBI) for details of the no-objection certificate it allegedly extended to the KIIFB, allowing the agency to take out large loans in the foreign financial market .
The Director General’s attempt to forensically examine the functioning of the KIIFB has arguably turned into the last battle front between the state and the Center. Finance Minister TM Thomas Isaac said on Sunday that the ED’s attempt to investigate the KIIFB could precipitate extraordinary administrative paralysis.
The agency tried to put an end to the development campaign financed by the KIIFB at the request of its political masters at the Center. With the threat of an ED probe hanging like a sword of Damocles over the KIIFB, investors could refrain from buying its masala bonds.
The investigation could cause KIIFB’s income streams to dry up. The investigation comes at a time when the International Finance Corporation (IFC) had expressed its willingness to provide loans to the KIIFB.
Mr. Isaac disagreed with ACG’s conclusion that the KIIFB’s offer to obtain loans in foreign financial markets was unconstitutional. The KIIFB was a legal person and not the state government.
In accordance with FEMA provisions, legal persons could issue masala bonds to raise funds in foreign markets. The KIIFB was not a statutory body within the meaning of the CAG.
The KIIFB worked on a market-sensitive annuity model. He has ensured that his commitments never exceed his assets. The government would mobilize public opinion against the political decision to undermine the KIIFB.
The Bharatiya Janata Party (BJP) and Congress were behind the plot to deprive Kerala of much needed infrastructure development funds. The government has called on the country’s top legal scholars to challenge the CAG’s finding in the High Court.
Dr Isaac said the CAG unilaterally submitted its audit observation regarding the KIIFB without granting the state a right of reply. The government would also lead the battle to preserve the KIIFB in the Assembly and in election campaigns, Dr Isaac said.