The biggest-ever bailout announced by the Union Government for the Unit Trust of India (UTI) is good for many reasons. But most important, it ends the anxiety of over 20 million investors. Now investors holding more than 5,000 units of the flagship scheme US-64 can redeem 5,000 units at Rs 12 a unit and the balance at Rs 10 a unit from May 2003 onwards.

UTI will also honour commitments on its assured-return schemes. Bridging the chasm in the assured price and the current nav of US-64 units will cost the Government about Rs 6,000 crore. The promises on assured-return schemes will cost Rs 8,561 crore. In all, the Government plans to infuse Rs 14,561 crore of taxpayers' money into UTI.

Interest rates on assured-returns schemes like the monthly income plans (MIPs) will be lowered to match the prevailing interest rates. The UTI Act will be repealed and the behemoth will be split into two entities-a government-controlled UTI-I and a professionally run UTI-II. While UTI-I will handle US-64 and assured-returns schemes, UTI-II will include all NAV-based schemes, including the US-64 units issued after it became NAV-based in January 2002.

Because of its troubled past, UTI's assets dipped from Rs 76,547 crore in 1999-2000 to Rs 51,434 crore in 2001-2. Since 1997, the Government has sunk in Rs 4,600 crore in bailouts to UTI, but skirted the basic problem-the way UTI was run. It used Band-Aid where surgery was required. This time it has opted for dissection. The coming months will show how the patient responds. The message to the investors is simple: UTI-I is government, so stay with the scheme till it matures. And UTI-II is like any reasonable mutual fund. So, invest with caution and do not bank on another bailout.

-Babar Zaidi

« All repayment commitments on US-64 and assured-return schemes to be met.
« Redemption date for US-64 extended beyond May 2003.
« Tax incentives to dissuade US-64 investors from bulk selling.
« Interest rates on assured return schemes to be lowered.
« UTI-II to be run by a professional chairman and a board of trustees.
« It will be privatised once distribution of assets and liabilities between UTI-I and UTI-II is finalised by the Government.
« UTI Act to be repealed and both the entities will be subject to SEBI guidelines.

TWO FOR ONE

UTI with assets of Rs 49,655 crore and 72 schemes has been split into two companies.

US-64 and all assured returns schemes

UTI-II
All NAV-based schemes and US-64 units issued after January 2002

SIGNPOSTS

INDUCTED: Into the Congress, Air Marshal M.S. Sekhon, who had to quit the air force for allegedly soliciting the help of former Punjab chief minister Parkash Singh Badal for a promotion.

NAMED: Kumar Mangalam Birla, as the only Indian businessman to be listed in Fortune's list of 40 billionaires under 40 years of age.

ANNULLED: The election of Kamla Jaan, as the mayor of Katni, Madhya Pradesh, from a seat reserved for women. Kamla is a eunuch.

ARRESTED: Brahmeshwar Singh Mukhiya, founder of Ranvir Sena in Bihar. He is wanted for more than 25 massacres

AWARDED: The Vyas Samman, to Hindi author Rameshchandra Shah.

Left to Right

P. Kesavan Nair

Centre of Indian Trade Unions Kollam District Secretary P. Kesavan Nair is the author of an impressive array of books on science, including one on scientist Stephen Hawking. Till now the CPI(M) used to bask in his reflected glory. Today the party is contemplating action against him. His crime ? His latest book, Bhouthikathinappuram (Beyond Physics), the party feels, is simply blasphemous. The book is a treatise on the links with physics of Vedanta philosophy as propounded in scriptures like the Upanishads. The party has resolved to denounce Nair's book. "Nobody denies some points of similarity in Vedanta philosophy and modern physics. But to say that Vedanta is the source of all modern knowledge is to spread superstition," says a top CPI(M) leader. No grace Marx for Nair.

-M.G. Radhakrishnan