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UTI bill adds up to Rs 20,000 crore

BS Economy Bureau in New Delhi

Till date, the Centre has sunk Rs 4,600 crore (Rs 46 billion) of taxpayers' money in the Unit Trust of India.

The Cabinet Committee on Economic Affairs' decision on Saturday will result in an additional burden of Rs 14,561 crore (Rs 145.61 billion) for the Centre.

No wonder, the two-way split of the mutual fund behemoth, managing assets of Rs 44,000 crore (Rs 440 billion) as on date, was prompted by an equal desire to stop the haemorrhaging of the fisc and simultaneously find a long-term and final solution to the issue.

In 1999, the Centre had issued a Special Securities Scheme for Rs 3,300 crore (Rs 33 billion) by taking over a large percentage of public sector scrips which had a considerably lower book value.

The Centre, till date, continues to pay an interest of 11.2 per cent a year to the trust. UTI, however, is yet to pay any dividend to the government.

In 2001-02, the Centre provided a cash support of Rs 300 crore (Rs 3 billion) to US-64 again, after the dramatic freezing of the sale and repurchase of units on July 2 last year.

This year, the Centre has doled out Rs 500 crore (Rs 5 billion) and has promised another Rs 500 crore for the US-64 scheme to meet the difference between its net asset value and the administered repurchase price.

A large part of the Centre's commitment to US-64 investors will, however, have to be met early next year. Officials said about Rs 6,000 crore (Rs 60 billion) would be required then, which could be raised by issuing secondary market bonds to UTI. The Centre's liability would be the interest to be paid on these securities.

Finance secretary S Narayan said the Centre would, more importantly, work out a tax concession package to enthuse investors to remain with the scheme after May 2003.

A dividend tax and a capital gains tax exemption, expected in the next Budget, will also cost the government if the fund performance improves.

The situation is somewhat better on the assured-return schemes. The finance ministry has so far only given a guarantee of Rs 1,000 crore (Rs 10 billion), though officials said the Cabinet Committee on Economic Affairs had also cleared a proposal to give cash support, if necessary, for the schemes.

The gap in the schemes, including the monthly income plans, is about Rs 8,561 crore (Rs 85.61 billion) over the next 6-7 years, of which Rs 1,000 crore (Rs 10 billion) will be provided in this fiscal as and when the need arises.

Add the cost of running loss-making assets of Rs 25,000 crore (Rs 250 billion) on the government account, and the bailout for under 3 million UTI investors does not come cheap for the 30 million taxpayers in the country.

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