LDF government’s masala bonds unconstitutional, says Chennithala

Leader of the Opposition Ramesh Chennithala has said that the Left Democratic Front government’s masala bonds are unconstitutional.

Addressing a press meet here, Mr. Chennithala substantiated his charges stating that the bond issue violated Article 293(i), which permitted the State and its entities to go for borrowings only in India. He said there were several information gaps in the masala bond issue that the government was unwilling to explain.

The first one related to the nature of the bond issue. The government and Finance Minister T.M. Thomas Isaac claim that the masala bonds, floated by the Kerala Industrial Infrastructure Fund Board (KIIFB), was a public issue. According to a KIIFB newsletter, the bond issue opened on March 26 and concluded on March 29, after which the subscribed amount of ₹2,152 crore was credited to the KIIFB account.

The Finance Minister’s claim that it was a public issue in Canada and 40 companies had participated was falsehood.

Mr. Chennithala wanted the Chief Minister and the Finance Minister to give a convincing reply to doubts raised by him in the media and through letters he sent during the past weeks.

He sought to know whether negotiations were held with various companies before finalising the deal with the CDPQ, a Canadian pension fund which has high stakes in infrastructure development. He also wanted to know the appropriateness of the participation of CDPQ given its close links with SNC-Lavalin, one of a co-accused with Mr. Vijayan in a power project case dating back to the mid-1990s.

Mr. Chennithala said the Finance Minister’s claim that the bond issue had clearance from the RBI could not be a justification. Mr. Chennithala also expressed fears about the impact the high-cost masala bonds would have on the State’s finances, leading it into a debt trap.

The economics of the masala bonds too was untenable because the State would end up paying over ₹1,000 crore towards servicing the bond issue, not to mention the cascading effect it would have on the development of the State.

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Printable version | Feb 23, 2020 1:15:38 PM |

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