KFC’s loss: Let the truth come out
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Kerala'a opposition MLAs, P.C. Vishnunath, T.J. Vinod, M. Vincent, and K.K. Rema, had asked the Finance Minister on July 1 last year, about the functioning of the Kerala Financial Corporation (KFC). They had specifically inquired whether KFC's operations had been evaluated, if the corporation had invested funds in Ambani's company, and whether the money had been lost. These were the unstarred questions through which the opposition wanted to raise debate in the House. However, the minister in charge of the portfolio did not provide a response. This issue, which seemed destined to become just another unanswered question in the Assembly, has now been brought to the forefront once again by the opposition leader, V.D. Satheesan. He has presented these allegations with greater seriousness, revealing that during the first Pinarayi Vijayan government, KFC had invested ₹60.8 crores in Reliance Commercial Finance Limited (RCFL), a financial institution owned by Anil Ambani. He further alleged that, as RCFL went bankrupt, the state lost a total of ₹101 crores, including interest. This incident occurred in 2018. Accusing corruption in investing such a large sum in RCFL, which was facing significant losses at the time, Satheesan demanded an investigation into the middlemen involved in this deal. He also pointed out that KFC's annual report had failed to mention this transaction.
The government has not dismissed the opposition leader's allegations. Former Finance Minister Thomas Isaac and current department minister K.N. Balagopal have admitted that the money was invested in Ambani's company and that only ₹7.09 crore was recovered when the company shut down in 2019. The government's counterargument is that a case has been filed in the Bombay High Court to recover the entire invested amount. In other words, the government also acknowledges that the deal between KFC and Ambani was a loss-making deal. However, they claim there was no corruption or 'Ambani gift' as alleged by the opposition, and that everything was legal.
Even if this is taken at face value, several questions remain. Firstly, there is no answer to the allegation that the 2018 deal was finalised without the knowledge of KFC's board of directors. The company's Asset Liability Management Committee recommended the investment, and records indicate that the board of directors met only after the investment process was completed. Secondly, there is no mention of the investment in the 2019-20 and 2020-21 annual reports. The recovery of ₹7.09 crore was noted in the subsequent annual report, which was how the public became aware of the deal. Is this transparent? Thirdly, the finance minister, who provided detailed responses to other assembly questions related to KFC, did not address this specific question. Typically, delays or omissions in answering arise when information on the subject is incomplete or for other reasons. Or else it will be not answering the query. However, when the opposition leader raised the same issue during a press conference, the finance minister clarified the government's position immediately. This suggests that the lack of a response in the assembly was deliberate. In other words, these questions cannot simply be dismissed as political allegations. A comprehensive and transparent investigation is necessary to address the matter.
The Kerala Financial Corporation (KFC), was established in 1953 to promote industrialisation and development in the state. Its primary objective is to accelerate industrialisation by providing financial assistance to micro, small, and medium enterprises in the manufacturing and service sectors. KFC is currently a profitable public sector undertaking. Even critics acknowledge its significant contributions to industrial growth, improved production, and job creation. The 14.5% increase in loan disbursement during the second Pinarayi Vijayan government has undeniably strengthened medium and small-scale industries. However, a recent revelation of a seemingly dubious transaction within this institution, which has been a source of relief for entrepreneurs during the state's economic crisis, has cast a shadow over its reputation. The opposition leader has hinted at further revelations, suggesting that this issue will dominate the upcoming legislative assembly sessions. Regardless of that, the state has suffered a significant financial loss due to this transaction. Therefore, it is imperative to know how this loss came to be incurred and what role middlemen had in it.