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Centre to give UTI Rs 450 crore for MIP 97

BS Economy Bureau in New Delhi

The Centre will provide an additional sum of Rs 450 crore (Rs 4.5 billion) to meet the redemption pressure on monthly income plan-MIP 97(IV) of Unit Trust of India, which has matured on Thursday.

The sum will take the aggregate support provided by the Centre to the mutual fund major to Rs 950 crore (Rs 9.5 billion) in this fiscal, of which Rs 500 crore (Rs 5 billion) had been provided to tide over the liquidity problems of US-64 in the first supplementary budget. The additional support will be provided in the second supplementary demand for grants to be cleared by Parliament in the winter session.

The Centre has also provided a guarantee of Rs 1,000 crore (Rs 10 billion) for liquidating the assets in Development Reserve Fund of the Trust to meet the redemption pressures for MIP-97(I) and (II) in April and May and the MIP 97 (III) at the end of August this year.

To ensure that the holders of MIP schemes have an incentive to stay on, the Centre has also held out the carrot of income tax exemption for five years from the date the ordinance is notified.

The UTI (transfer of undertaking and repeal) ordinance 2002, issued by the Centre says "no income tax or any other tax shall be payable by the administrator (of the trust) for a period of five years, in respect of any income, profits or gains derived or any amount received".

The tax benefit shall be applicable for the 25 schemes of the Trust that will be administered by an administrator till they are liquidated.

The ordinance also says the administrator of the "specified undertaking" shall be a person or a body of persons, who would run it on behalf of the Centre. He would be assisted by a Board of Advisers whose term of office and fees and others would be decided by the government.

The chairman, or any of the trustees would not be entitled to any compensation for the premature termination of the UTI in its present form.

On the issue of compensating the original promoters of UTI, the ordinance has left the issue to the discretion of the Centre. It only says the Centre would refund such amount as may be determined by it after consideration of the book value, assets and liabilities.

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