|
Privatising Unit Trust of India |
 |
The country’s largest Mutual Fund, Unit Trust of India, which ran into serious liquidity crunch and had to suspend redemptions of US-64, is now being considered for privatization. The Government has realized several reasons why there is no longer the pressing need for the government to be in the business of running a mutual fund. UTI was set at a time when private mutual funds did not exist. The Government considered itself to be directly responsible for providing investors with sage investment options and deepening the capital markets. That role has changed in recent years. There are several private sector options available to investors, with the financial sector being opened up and foreign mutual funds being permitted entry into the country.
With the change in the role of the Government, limiting its role to governance, the Government managing a mutual fund is incongruous. Even defence production, the last bastion of socio-economic edifice, has fallen. The sector has been opened to private manufacturers.
Technically, the Government could exit out of UTI since the bulk of UTI’s monthly income schemes (MIS) mature by 2004. The internal estimate is that the trust is bound to honour retirement of these schemes since an assured return has been promised to investors on them. Rest of the schemes do not necessarily fall into this category. By 2004, all of UTI’s schemes would be NAV-linked and the investors who choose to remain with UTI would be those who see value in staying on with the mutual fund. Hence, the issue of violating the trust of investors would not arise as much at that point of time, as it did a few months ago, when the US 64 scheme went under.
Sources point out that public reaction to the idea itself may not be that strong. UTI investors have come to accept the fact that UTI could declare market-related dividends on schemes as popular as the US 64. They have also come to accept the fact that the government would not constantly step in to bail out the institution.
The political leadership too has started to voice the opinion that tax-payer’s money should be frittered away on bailing out weak and inefficient institutions. Only recently, Finance Minister Yashwant Sinha made it clear that repeated bailout packages using the taxpayer’ money are not warranted. Even Parliament has not been so virulent to the idea of the Government not supporting the weak institutions, including the UTI through the budget.
It is in this scenario that the possibility of the privatization of UTI is being discussed. Review meetings within the Finance Ministry in the last few days indicate that the institution has a long way towards being healthy.
F
|
