Pravasi Chitty, the savings scheme launched by Kerala for expatriates early this year, has turned out to be a damp squib with very few people subscribing.
Though registration started in June after an intense campaign – both in the Gulf and back home – the scheme attracted interest from less than 10,000 people.
Of these, only 1,637 actually subscribed to the scheme that targets Rs500bn for infrastructure funding in five years. On Sunday, T M Thomas Isaac, the finance minister, inaugurated the auction of the first five chitties.
Chit fund or chitty is a local savings scheme where subscribers pay a monthly instalment to take back a lump sum through auction or by a draw of lots.
“The response has been very disappointing. We held a lot of promotional events in the Gulf expecting a good response,” said an official who preferred to stay anonymous.
“We also spent a lot of money for these roadshows. We hope to launch 52 batches this month if we get enough numbers for them all,” he added.
While announcing the scheme last year, the minister had expressed hope that 100,000 to a million expats would join it.
Former Kerala finance minister K M Mani had demanded the government hold a special Assembly session on the scheme before its launch.
The Congress-led opposition had also pointed to many grey areas in the scheme that makes it risky for the expatriates to park their funds.
The state-run Kerala State Financial Enterprises (KSFE) is the administrators of the chitty, and the Kerala Infrastructure Investment Fund Board (KIIFB) manages the funds.
This year, the target was to raise Rs100bn through the scheme to help build two highways, and the authorities were expecting 200,000 subscribers initially.
Isaac had hoped to tap the funds expats remit every month.
The opposition alleges that the KIIFB has no permission from the banking regulator and Securities and Exchange Board of India to issue bonds.
The cash-strapped state which ranks 21st in ease of doing business spends all its revenue on paying salaries, pensions and debt servicing and borrows for everything else.
It is now sitting on a massive public debt of Rs2.07tn, and the dip in overseas remittances has hit its service-sector driven economy hard. As Kerala has crossed its borrowing limit, the state wants to use these funds for infrastructure projects routed through the KIIFB.
Rejecting Mani’s arguments that it lacked regulatory sanctions and hence was illegal, Isaac had said he was confident of raising Rs100bn from the scheme immediately.
Though Issac claims he has all statutory clearances, the opposition leaders are not satisfied as the former was unable to support his claims with documentary evidence.