Kerala Masala Bonds Issue, Interest Rate Rocks State Assembly
The Kerala Assembly on Tuesday witnessed heated discussion between state finance minister Thomas Isaac and members of the opposition Congress-led United Democratic Front over masala bonds sold by Kerala Infrastructure Investment Fund Board in London recently.
While the opposition alleged lack of transparency and clarity regarding issue of the Kerala masala bonds and its high interest rate, Isaac said it would help accelerate the state's infrastructure development.
The Congress-UDF also urged the Left government to table in the House all records pertaining to the sale of masala bonds.
KIIFB had recently raised Rs 2,150 crore through its debut masala bond issue as part of its plan to mobilise Rs 50,000 crore to fund large and critical infrastructure projects in Kerala.
Chief Minister Pinarayi Vijayan had rung the opening bell at London Stock Exchange earlier this month to mark the listing of the masala bonds sold by KIIFB.
Congress legislator KS Sabarinathan, who moved an adjournment motion over the issue, said the interest rate of KIIFB's masala bonds was 9.72 percent, which was the highest of 44 such bonds being listed at the LSE in the last two years.
"Kerala will have to give Rs 210 crore as interest in one year. Not only this exorbitant interest rate, the projects designed by the KIIFB in this regard are also mysterious," he said.
He questioned the mention of the Rs 12,240 crore Kannur Industrial Park project in KIIFB documents and said the Kerala Assembly and the opposition were unaware of such a mammoth initiative.
Sabarinathan also asked the government to explain how Canadian pension fund Caisse de dépôt et placement du Québec, which holds nearly 20 percent stake in controversial firm SNC Lavalin, had bought the lion's share of the Kerala masala bonds.
Sabarinathan was referring to alleged irregularities in awarding of contracts to Lavalin for renovation of three hydroelectric projects in Kerala when chief minister Pinarayi Vijayan was the power minister in 1998.
"We are not against accepting investment. There should be transparency... But the government's actions regarding the issuing of the masala bond were mysterious," said Leader of the Opposition Ramesh Chennithala, asking why the government had not held any prior discussion in the Kerala Assembly regarding the move.
Rejecting the opposition charges, Isaac said the Kerala masala bonds were issued following all the prescribed guidelines of the Reserve Bank of India.
"I have never claimed that the interest rate of 9.72 percent is low. When we borrow from the market, we can avail at this rate only. When the state's infrastructure is developed using this money, we can attract investments," he said.
Stating there was no need for any anxiety over the repayment of the loan, the minister said the petrol cess and upto 50 percent of motor vehicle tax would be given as grant to KIIFB, which would be used for the purpose.
He also expressed confidence that the loan could be repaid completely by 2030 and said all the documents regarding the bond issue were open for the opposition to verify.