In Kerala, ED-govt spat out in open with minister Isaac's bitter jibe

The skirmish between the Kerala government and the Enforcement Directorate is now out in the open with Finance Minister Dr Thomas Isaac lashing out at the central agency, asking it to “keep their radar with themselves.”

A WhatsApp message circulating among journalists, allegedly sent by the ED, on the probe against the Kerala Infrastructure Investment Fund Board (KIIFB) is the latest in this series of frictions between the state government and the ED.

Dr. Isaac has posted the screenshot of the message on social media and slammed the ED saying it is playing a nasty political game at the behest of BJP against the state.

The WhatsApp message in question reads: “The C and AG has found that the Kerala govt has raised Rs 2150 crore from international market without the consent of the Centre, using Kerala Infrastructure Investment Fund Board (KIIFB). Wouldnt that amount to possible violation of FEMA. ‘KIIFB masala bond too has come under ED radar’.”

(The C and AG refers to the Comptroller and Auditor General of India, a constitutional authority that is empowered to audit all receipts and expenditure of the central and the state governments)

Stating the message in his post, Dr Isaac called it clear evidence for ED’s ulterior motives and slammed the agency saying it should not try to intimidate the government. He also challenged the Congress saying it must clarify whether they agree with ED’s move against a body constituted by a statute passed by the Assembly unanimously.

Dr Isaac also challenged the ED’s capacity to initiate an inquiry on the basis of an untabled CAG report. “The power to initiate an action on the basis of CAG report is exclusively entrusted with the Pubic Account Committees of the Legislative Assembly as well as the Parliament. The ED has no power to act upon media reports with regard to the references in a CAG report,” he said.

Meanwhile, the ED denied the allegation of having sent the message to the media. “It’s the result of some misunderstanding. No ED official has sent any message like that,” said an ED official requesting anonymity.

ED sources claimed the investigation against KIIFB was based only on Dr Isaac’s statement and the agency is not in possession of the CAG report. “The finance minister himself made a statement against CAG referring to some adverse remarks. We initiated an investigation on the basis of the same,” said the ED official.

He added the investigation is only in its preliminary stage and that ED has sought a report from the Reserve Bank of India as to whether the external borrowings by KIIFB is legal or not. According to ED, they will not pursue the investigation if the RBI finds the financial activities of the KIIFB are not in violation of its rules and regulations.

The RBI had in 2018 given approval for Masala bonds to the KIIFB through designated banks. The letter of approval sent by RBI, dated on June 1, 2018 (which The Federal has accessed a copy of) to the Axis Bank, states, “We advise that we have no objection under the Foreign Exchange Management Act, 1999 for the captioned company to issue the Rupee Denominated Bonds for 2672.80 Cr (approx. USD 400 million) under the extant RDB framework-issuance of Rupee denominated bonds overseas.”

In the RBI’s report on the eligibility parameters, it is also stated that “any corporate or body corporate is eligible to issue such bonds.” The KIFFB is a statutory body corporate which falls under the eligibility criteria, according to the finance minister.

When asked whether the ED had verified RBI documents on foreign borrowing before launching an investigation, an official said that the agency is in the preliminary process of adducing facts.