Outlay of Rs.40,000 crore with an innovative financing plan

Finance Minister T.M. Thomas Isaac has unveiled a 10-year massive road modernisation project with an estimated capital outlay of Rs.40,000 crore with an innovative financing plan.

Citing the ‘conservative fiscal policy' of the Centre as a major stumbling block to Kerala's development, the Minister, while presenting the State budget here on Thursday, said that since the Centre would not permit the State government to borrow beyond 3 per cent of the State Domestic Product (SDP) even if it wiped off its revenue deficit, one option before the State was to enable autonomous boards or companies controlled by the government to raise loans. The Road Fund Board and Roads and Bridges Corporation Ltd. would carry out this responsibility for the State.

The Minister said that this would be possible only if the two organisations were made independent and restructured and achieved the credit rating required to generate enough confidence of the market to lend Rs.40,000 crore to them in 10 years. For this, three to six months' revenue from motor vehicle tax every year should be deposited in an escrow account through legislation. Simultaneously, these organisations would have to adopt measures to mobilise own resources from advertisements and land development. If there was a legally protected source of income which guaranteed regular repayment of loans, the board and the corporation could mobilise loans from the market and carry out the road restoration works.

Once the interest-free financing institution Al Barak became a reality, it would become easier to mobilise resources for the comprehensive road renovation project. The State government would permit the board and the corporation to levy a fixed percentage of service charge for the construction work. A share of the profit would be given to Al Barak for the funds deposited. Since there were certain practical problems related to double taxation in the smooth functioning of interest-free financing institutions, a committee would be appointed to examine such issues.

The Minister set apart Rs.1,000 crore as interest-free loans to the corporation and the board. Using the amount, the two agencies would take up road work estimated at roughly Rs.5,000 crore under a 320-km State Highway Package of Rs.1,920 crore, a 765-kilometre Main District Road Package of Rs.765 crore, a Rs.1,000-crore package for constructing bypasses, a Junction Modernisation Package involving Rs.202 crore, a Kozhikode Road Package of Rs.180 crore, a Thrissur Road Package of Rs.142 crore, a Kollam Road Package of Rs.120 crore and a Thiruvananthapuram Road Package of Rs. 250 crores. In addition, Rs.586 crore would be allotted to the Public Works Department under the annual Plan and Rs.147 crore for roads and bridges under assistance from the National Bank for Agricultural and Rural Development.


Pointing out that a strong research and development support would be necessary for the Comprehensive Road Renovation Project, the Minister said that a research centre with test track would be started at the College of Engineering, Thiruvananthapuram, with an initial outlay of Rs.5 crore.

The Kerala Highway Research Institute would be made the headquarters of the Design Research and Investigation Quality (DRIQ) Board, which would take care of quality control and preparation of the detailed project report, he said, setting apart Rs.5 crore for the purpose.

  • To make board and corporation to raise loans
  • Role for proposed interest-free financing body