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NRIs sceptical about Pravasi Chitty scheme
By Ashraf Padanna March 13, 2017
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TRIVANDRUM: Expatriates and public finance experts have raised serious doubts about Kerala’s move to raise Rs120 billion from them.

“(It’s) ideally good, but the returns that the NRIs (nonresident Indians) get out of this scheme is not clear,” said Albin Joseph, associate director, Xpress Money.

“Also how the government is going to pay back the principal amount after completion of the Chitty is a challenge. There should be more clarity on the government bonds.”

Pravasi Chitty where subscribers receive their monthly deposits in a lump sum by draw is expected to begin in two months.

It hopes to enroll 100,000 of the 1.85 million Kerala expatriates.

While the Kerala State Financial Enterprises (KSFE) manages the Chitty, the investors can deposit their money in bonds for roads which usually have a long gestation period.

Expats can remit money through any of the payment gateways. But the government is silent on options available to them for making a bid and furnishing guarantee.

The entire remittance automatically goes into NRI bonds of Kerala Infrastructure Investment Development Board (KIIFB) in the name of KSFE, which will have a call option for paying the subscriber when they get the bid. The balance free float will remain in the KIIFB bonds.

“The whole concept is based on utilising the free float,” said Hamza Pottintavida, head of customer services, Hoegh Autoliners.

“The expectation is that there will be a massive fund flow. (But) there’s no clarity (on returns). The government is basing their expectations heavily on NRI loyalty which is a myth.”

The KSFE takes the first installment payment as commission, and if the government achieves its target and an expat invests Rs 5,000 a month on an average, it would receive Rs500 million a year.

The NRIs also question the state’s lopsided development model which scares investors away.

The state’s finance minister TM Thomas Isaac has already ruled out tollways.

He would instead go for additional taxes on fuel and vehicles, which could trigger protests.

“Toll collection is universally accepted method of financing infrastructure,” says KV Shamsudheen, director of the Gulf based Barjeel Securities.

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