Politics | Have the KSFE raids exposed the fissures within the CPI(M)?

Kerala Chief Minister Pinarayi Vijayan

The controversy over the Kerala Vigilance and Anti-Corruption Bureau (VACB)’s simultaneous raids at 40 branches of the Kerala State Financial Enterprises (KSFE) on November 27 has been raging since then. Finance Minister Thomas Isaac, the minister in-charge of the KSFE, went on a tirade against the VACB, and questioned the motives of the agency and those pulling the strings from behind.

The obvious allusion was to Chief Minister Pinarayi Vijayan, who also holds the home portfolio and under whom the VACB operates. Vijayan has of late come under criticism from various quarters for his perceived lack of control over the police department.

Isaac kept attacking the ‘manner of the raids’ and the vigilance department for three consecutive days, backed by President of the Centre for Indian Trade Unions (CITU) and senior Communist Party of India (Marxist) leader Anathalavattom Anandan, calling it a conspiracy to tarnish the credibility of the KSFE, a Miscellaneous Non-Banking Financial Company (MNBFC) and a public sector chit fund company owned by the Government of Kerala.

The 51-year-old KSFE has been a flagship profit-making venture with an annual turnover of Rs 50,000 crore, and has been dominating a market which has spawned many small private chit fund companies.

Isaac’s outburst needs to be put in context as central agencies including the Enforcement Directorate (ED), the Customs and Central Excise department and the National Investigation Agency (NIA) are actively investigating various angles of the gold-smuggling scam and lately, spreading their tentacles into the state government’s domain.

The same week also saw raids at the Uralungal Labour Contract Co-operative Society (ULCCS), controlled by the CPI(M). Isaac saw the raids and the offences listed out by the VACB as a step towards facilitating an ED probe into the affairs of the KSFE.

Also in Isaac’s line of fire was Raman Srivastava, a controversial officer whom Vijayan appointed as police adviser, whose alleged role in amending Section 118 of the Kerala Police Act had become a hot topic of debate. Srivastava also serves as security adviser to the Muthoot Pappachan Group (MPG), a private finance company—and this has raised bona fide questions of conflict of interest.

Coincidentally, after Isaac went hammer and tongs at it, the VACB circulated a note where it listed out the offences it was inquiring against the KSFE. The VACB’s note pointed out several anomalies and suspicions, including how some of the branches were not transferring deposits to the state treasury or nationalised banks, impropriety in allowing defaulting customers to take part in auctions, employees acting as benamis to fill quorums, spike in demand for high-value instalment schemes raising suspicions of conversion of black money, gold loans being sanctioned to private money lenders in violation of rules etc.

While KSFE Chairman Peelipose Thomas rubbished most of these charges, Isaac contended that these were more or less the same issues pointed out by the auditor general.

Vijayan sought to put an end to the controversy by stating how the VACB was well within its rights to conduct raids at the KSFE and how his consent wasn’t required to undertake it. The Chief Minister also rubbished Isaac’s conspiracy theories and defended the VACB action. While Vijayan defended Srivastava, brushing aside suggestions that his adviser had any role in the conduct of the raids, he pointed out how it was up to him to act (or not act) on the VACB report.

Nevertheless, Isaac contends that the damage has already been done, with the ED now getting a chance to poke its nose into the affairs of the KSFE as anything pertaining to black money comes under the purview of the ED.

In the wake of Vijayan’s clarification, the CPI(M) party machinery, which initially backed Isaac, went behind Vijayan. The matter was sought to be put to rest by the CPI(M) State Secretariat which met on December 1, releasing a statement categorically backing Vijayan. A defiant Isaac, however, remarked that he would raise the issue again within party forums following the local body polls.

Different political interpretations have been made in the wake of this public spat, and one wonders why this matter played out in public for days on end. It is understood that the personal relations between Vijayan and Isaac are strained, and that there is a clear communication gap. While such political differences didn’t spill out in public when Kodiyeri Balakrishnan was state secretary, things have spiralled out of control after Balakrishnan stepped down from the post.

There is also a growing suspicion within the CPI(M) state unit whether Isaac’s defiance was timed to coincide with Vijayan’s setback — having to backtrack on the Kerala Police Act amendment and, if it was an attempt to weaken Vijayan’s grip over the party.

Once Vijayan took a stand, his Cabinet colleagues EP Jayarajan, G Sudhakaran and K Surendran backed the Kannur strongman and argued that Isaac’s demand that he be notified by the VACB before undertaking raids in the premises of the KSFE is far-fetched.

Although Isaac’s charges and Vijayan’s responses make it amply clear that the VACB is indeed a caged parrot, one can only wonder why no corrective steps were initiated in the wake of the auditor general’s report, and if something is rotten in the affairs of the KSFE.