National

Kerala govt to use Shariah-based fund for roads

Thiruvananthapuram: The Left Front government in Kerala plans to depend heavily on Shariah-based fund from Islamic countries for developing the road network in the state. The budget for 2011-12, presented by Finance Minister Thomas Issac in the Assembly on 10 February, unveiled road development project of Rs 40,000 crore for the next 10 years. The state government has set aside Rs 1,000 crore for the scheme.

In a state where the idea of BOT roads is yet to go down well with the political parties and agitating groups, the government plans to raise a major chunk of the money from the Shariah-based Islamic non-banking financial entity, Al Barakh Financial Services Limited, which has influential NRIs as major stakeholders. The Congress- led UDF has not raised any objection, as their leaders have close links with the powerful NRIs from the state.

Issac said the State Road Fund Board (SRFB), and the Kerala Road and the Bridges Development Corporation (KRBC) would be allowed to borrow from the open market. To achieve their credit rating, revenue from the motor vehicles’ tax would be deposited in an escrow account. Simultaneously, these organisations would mobilise resources from advertisements and land development.

“Once the interest-free financing institution, Al Barakh, comes into operation, the state government would permit the SRDB and KRBC to levy a fixed percentage as service charges for their construction work. A share of the profit will be given to Al Barakh,” said Issa.

He said, there are some practical difficulties for the functioning of interest-free institutions such as ‘double taxation’. An expert committee will be appointed to study it, the minister added. Meanwhile, the Alternative Investments and Credit Limited welcomed the High Court judgement which upheld the Kerala government’s decision to invest in the interest-free finance institution Al Baraka. The judgement, which underlines the uniqueness of the Indian secularism, upholds the right of a community to carry out its economic activity as per its faith and the right of the government to introduce managing guidelines, said A Muhammedali, chairman of AICL. The meeting of the board of directors of the AICL congratulated Industries Minister Elamaram Kareem, Industries Principal Secretary T Balakrishnan, Al Baraka chairman Gulfar Muhammedali and general secretary of the Indian Centre for Islamic Finance Mr H Abduraqeeb for taking interest in the case. The AICL is a non-banking financial institution working on Islamic finance theories and based in Kozhikode. The Al Baraka Financial Services is an interest-free financial institution promoted by the state government’s Kerala State Industries Development Corporation. Though the idea of such an institution came up from the idea of a Shariah-compliant Islamic bank, the Al Baraka aims to function as a non-banking institution as the Reserve Bank has not yet permitted the functioning of an Islamic bank in the country. The Kerala government decision to invest in the institution was questioned in the Kerala High Court. The High Court recently ruled in favour of the government. The government plans to attract investment from the large number of non-resident Keralites, who are hesitant to invest their money in other ventures out of fear of the involvement of interest.

MG News Desk
 
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This article appeared in The Milli Gazette print issue of 1-15 March 2011 on page no. 5

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