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Keep off UTI, Malegam panel advises Centre

P Vaidyanathan Iyer

The Malegam committee has strictly recommended against any government role in Unit Trust of India restructuring.

In its report on corporate repositioning of the institution, the committee has asked "the government to totally distance itself from UTI".

To ensure this, the committee comprising chartered accountants Y H Malegam, R P Chitale, Cyrill Shroff and Jaimini Bhagwati, joint secretary, ministry of finance, has called for a complete repeal of UTI Act and its replacement by a new enactment.

According to the committee, if the UTI Act were not repealed but merely amended, there was a danger that the government would still be left with certain residual responsibilities under the Act. This would hinder in changing the public perception that the Centre is fully behind the trust.

To illustrate the point, the committee has elaborated further and said that UTI's structure when the Act is not fully replaced but merely amended, would give the trust a fully government character. This might then necessitate that UTI be managed by senior government officers. Also, the public perception that the government is fully accountable would remain even after the amendment.

However, the committee has emphatically said this was definitely not the preferred outcome. It has clearly stated that accountability cannot be divorced from the day-to-day management responsibility.

The committee's recommendation is significant considering that finance minister Yashwant Sinha had on July 10 said that he was in the dark about l'affaire UTI. Though Sinha said he would not pass the buck, given that he as the finance minister was finally responsible for whatever happened in the capital market, he maintained he was unaware of the worsening situation in the trust.

In repealing the Act, the committee has also suggested that care should be taken that the transaction costs including stamp duties, taxes, etc are minimised, if not completely eliminated.

It should be ensured that the ownership of the assets be vested in the proposed asset management company at the lowest possible cost.

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