Fresh revelations on Wednesday that two successive Kerala Finance Department principal secretaries had warned against the Kerala Infrastructure Investment Fund Board's (KIIFB) excessive borrowings have added urgency to the state government's move to order a probe into the infrastructure financing agency, IANS reported.

According to the documents now in the public domain, Ravindra Kumar Agarwal, who succeeded present Chief Secretary Biswanath Sinha as Finance Department Principal Secretary, recorded serious reservations about KIIFB's borrowing in an official file in October 2023. Agarwal warned that KIIFB's borrowings were affecting the state government's overall borrowing limit and could constrain funds available for routine expenditure, describing borrowing through KIIFB in a manner that reduced the government's own borrowing capacity as 'not a prudent decision'.

His observations followed similar warnings by Sinha at a meeting in June 2023. Sinha had cautioned that KIIFB's high-interest borrowings would impose a substantial burden on the state exchequer, affect Kerala's borrowing limit and potentially force cuts in funding for future development projects.

Chief Minister V.D. Satheesan has said an investigation into the agency is warranted, following an expert committee report tabled in the Kerala Assembly last week. The committee, headed by retired IAS officer Sudha Pillai, recommended a fundamental overhaul: the state government taking over KIIFB's existing liabilities, funding repayment and ongoing projects through the annual budget, removing borrowing provisions from the KIIFB Act, and bringing the board under the state government's direct control, according to reports of the panel's findings.

The committee questioned whether KIIFB's loans, raised at interest rates higher than the state's own borrowing rates, had created a large additional annual liability, and noted that the Finance Department had no role in the board's functioning. Satheesan, who also holds the finance portfolio, said huge losses had been incurred because KIIFB's borrowings were costlier than the state government's own borrowings, and that the Cabinet would decide on the nature and scope of any probe.

Leader of Opposition Pinarayi Vijayan has hit back at the government over the KIIFB findings, questioning what was wrong with KIIFB funds being spent in Kannur district, PTI reported. The government is yet to announce which agency will conduct the proposed investigation.