UTI budgetary aid retained at Rs 6500 crore in 2004-05

The finance ministry has projected an unchanged Rs 6,500 crore as financial support for the Unit Trust of India in the ministry's demand for grants in the Union Budget 2004-05.

In Budget 2003-04, too, the ministry had provided a similar level of support. The sum was basically meant for providing the anticipated shortfall in the corpus of US-64 scheme to meet its redemption liabilities, which became due at the end of May this year.

Of this Rs 3,000 crore was provided as cash support and the rest as bonds for the mutual fund. But because of the improvement in stock market conditions in the current year, the scheme has been able to reduce the shortfall to quite an extent.

Because of the stock market boom, the underlying shares of US-64 have realized better value. But the unchanged allocation shows that inspite of this, there has been little savings for the Centre on this head.

However, the specified undertaking of UTI, which is the name for UTI-I has to also meet the redemption pressures of several assured returns schemes, which had also been ring fenced along with US-64, at the time of bifurcation of UTI in February 2003.

The Rs 6,500 crore meant for UTI is a projection by the department of economic affair. The department of expenditure will vet it before it is incorporated in the Budget. But given the open support extended by the union cabinet to the redemption pressure on UTI, there is little possibility of the same being whittled down.

The sum being provided by the finance ministry will mean that the pressure on the Centre's finances to provide support to the beleagured public sector financial institutions will continue in the next fiscal year also.

As per the mid-year review of the economy produced by the ministry last week, the government has already provided about Rs 2,700 crore extra as subsidy support as payment to financial institutions in 2003-04.