While Thomas Isaac claims CAG report false, Chennithala alleges that minister broke protocol
At a press meeting on Saturday, Kerala Finance Minister Thomas Isaac had dismissed the Comptroller and Auditor General’s report that KIIFB had raised loans “unconstitutionally”. Kerala Infrastructure Investment Board is a statutory body established under the Kerala Infrastructure Investment Fund Act 1999 to mobilize funds from outside the state revenue.
The CAG said in the report, allegedly, that KIIFB violated Article 293(1) of the Indian Constitution. The finance minister replied that it applies to the state government and not to a corporate body. Moreover, there have been allegations that the Kerala state had only allowed the audit of KIIFB under section 14(1) of the CAG Act and not Section 20(2). However, these are somewhat old. The latest allegation is that the finance minister “leaked” the CAG report — ‘draft report’, according to Thomas Isaac — resulting in procedural lapses.
The procedural lapse
Opposition Leader Ramesh Chennithala had alleged that Thomas Isaac had leaked the CAG report to the media. “For the first time in the history of not just Kerala but also India, a minister has leaked the CAG report and has called a media briefing on it. The current ministry is behaving as if none of the laws and procedures applies to them.”
Ramesh Chennithala added that the minister had made severe constitutional lapses concerning the CAG report as the Comptroller and Auditor General is a constitutional body. “According to a 2013 circular by the AG, the report must be kept confidential before presenting it in front of an assembly,” he said.
The state government has been on the back foot for the past few weeks considering the tremendous number of cases and investigations close the Chief Minister’s office. The Enforcement Directorate looking into the money laundering suspicion close to M Sivasankar — former Principal Secretary to the CM — and his team. Minister KT Jaleel, Kodiyeri Balakrishnan’s son Bineesh Kodiyeri, and a few others are also under the scanner of various agencies. Bineesh is under investigation for not only money laundering but also his part in drug smuggling. The Narcotics Control Bureau is currently investigating whether he had any part in pushing drugs. Sivasankar is under the scanner of various investigation agencies probing into his alleged part in smuggling gold and in to the various state government projects. Adding to all this would be Thomas Isaac’s decision to reveal the draft CAG report “unconstitutionally” to explain that the report’s claim of KFIIB being funded “unconstitutionally” was wrong. The irony is not to be missed here.
The problem here is the ambit of audit allowed to CAG under the Act, or as allowed by the government (governor). The issue had been raised last year when Thomas Isaac said that the CAG can only audit KIIFB under section 14(1) of the CAG Act. Under this section, the CAG can only audit the state funds that fuel KIIFB and not the masala bonds and other funds received from the market. Ramesh Chennithala had alleged that masala bonds should be brought under the ambit through section 20(2). However, section 20(2) can only be invoked if the institution that needs to be audited is outside the purview of CAG, requiring permission from the Governor.
The Kerala finance minister had already explained that KIIFB is already under the ambit of CAG, and the agency can investigate the masala bond as well. If anything, the minister has also explained that the CAG can approach the Governor for a further audit if there is a scope for it. However, these are not as straightforward as one would expect it to be. There are certain financial limitations that make a body or grant eligible under the scope of these sections. The CAG had argued that the state grant to KIIFB might fall under 75% since the Board had raised funds from the open market. If that were the case, then KIIFB would fall out of the purview of the audit and thus the need for section 20(2). Another issue was that the finance minister while stating that KIIFB comes under the ambit of CAG, also notes that the latter cannot be the statutory auditor of the former. Thomas Isaac had noted that KIIFB had to provide timely audited reports to the investors and hence an in-house audit vetted by the legislative assembly was better.
The Board had also set up a Fund Trust Advisory Commission headed by Vinod Rai — former Comptroller and Auditing General — in 2016 alongside other highly regarded members from RBI and NABARD. The commission would work as an oversight mechanism and would assess fund utilisation and repayment capability. This is a mechanism to check whether the Board has enough resources to meet debt obligations. The concept is nice, but it lacks the full transparency of section 20(2) audit of CAG.
Transparency and the scope of the audit is the argument here. Thomas Isaac makes good arguments regarding the sections, but it seems to fall short of the target. The finance minister claims that the BJP government at the Centre is using central agencies to stop the developmental progress in Kerala. He is also hinting at the Enforcement Directorate’s probe into the various state projects including K-FON, which also comes under the KFIIB scope. Meanwhile, the Opposition claims Isaac is trying to push corruption not development as the latter claims. “The finance minister is afraid that a CAG audit will reveal the illegal transactions and malpractices that happen through KIIFB,” they allege.
Opposition MLAs will be looking to approach the Speaker to initiate a breach of privilege of assembly against Thomas Isaac for “breaching constitutional practices” while revealing the CAG report. The situation might not look good for the state if the opposition decided to pursue this at the assembly, especially when the left government had always claimed to be “the defenders of the Constitution”.