The Centre has to provide for bonds worth Rs 8,000 crore (Rs 80 billion) in the Unit Trust of India's flagship Unit Scheme-64 in 2003-04. The finance ministry earmarked Rs 3,500 crore (Rs 35 billion) for the purpose in the Budget for 2003-04.

According to finance ministry officials, the 6.75-per cent tax-free bond option provided to US-64 investors has helped the government limit its cash outgo towards meeting the shortfall on the committed repurchase price to around Rs 900 crore (Rs 9 billion).

The ministry had, however, provided for a cash support of Rs 3,000 crore (Rs 30 billion) towards US-64 in the Budget. The calculations are based on an estimated net asset value of Rs 6 per unit.

The officials said the total cash redemptions of US-64 units, after the six-day extension of the bond switchover option to April 10, had been only around Rs 1,900 crore (Rs 19 billion). Individuals with less than 500 units accounted for cash redemptions of about Rs 600 crore (Rs 6 billion). Large investors accounted for around Rs 1,300 crore (Rs 13 billion), they added.

Of the total 5.1 million account holders in US-64, around 2.9 million were investors with holdings of less than Rs 5,000. UTI had encouraged these investors to redeem their units for cash because the volume of low-value transactions could increase, along with the attendant office and administration costs.

The officials also said the ministry had decided in principle to foreclose seven schemes, five of which were long-term assured-return schemes. The remaining two were monthly income plans, due to mature in 2004-05.

The assured-return schemes to be foreclosed included CGGF-86, RUP-II, CGGF-99 and RUP-99. The shortfall at maturity on these four schemes on July 1, 2002, stood at around Rs 16,500 crore (Rs 165 billion). The two monthly income plans maturing in the next financial year were MIP-99 and MIP 98 (IV), which had a shortfall of about Rs 1,500 crore (Rs 15 billion) on July 1, 2002.

Recently, UTI-I reset the interest rate on its five annual monthly income plans, where the capital was assured at maturity to lower levels between 3 per cent and 5 per cent. For MIP 99 (II) and MIP 2000 it was reset at 3 per cent. The interest rate on MIP 2000 (II) and MIP 2000 (III) was changed to 4 per cent, and on MIP 2001 to 5 per cent.