THE current Unit Trust of India (UTI) scam leading to the collapse of its flagship scheme US-64 is a gigantic fraud unprecedented in independent India, and warrants the union finance minister’s immediate resignation. Alongside, an enquiry must be conducted into the manner in which unscrupulous politicians, bureaucrats and businessmen manipulated the system. This is necessary not only to bring the guilty to book but also to cleanse the system and set in place mechanisms to prevent any such occurrence in future.

A merciless loot of the Indian people has taken place, to the tune of nearly Rs 6,000 crore. The manner in which this happened, displays the worst type of crony capitalism, whose high points are corruption and nepotism. The list of companies whose shares the UTI bought runs like a "who's who" of RSS-BJP sympathisers. Clearly, the finance ministry has been directing the UTI to siphon public money, the hard-earned savings of over two crore middle-class small investors, into such dubious companies. These companies, in turn, simply pocketted the money.

Reports by now clearly reveal that corporate houses have used the massive investible fund at the UTI’s disposal which, as of June 30, 2000, stood at Rs 75,159 crore, for their speculative profit-making in the stock exchanges. Following a similar crisis in 1998, the government had to bail out the UTI with a Rs 3,300 crore package. At that time, the committee to undertake comprehensive review of the functioning of the US-64 had recommended that these funds must be placed in the relatively safer areas of debt rather than in the high-risk areas of equity.

The Deepak Parekh committee had suggested a ratio of 75:25 for UTI investment in debt and equity. Yet, in the last few years, precisely the reverse was happening when this ratio was 25:75. Much of the investment in equity market by the UTI was in the by now infamous Ketan Parekh speculative stocks. Worse was the fact that when these stocks were falling, leading to the stock market scam/crisis, UTI continued to heavily invest in them. The UTI was clearly placing at the disposal of stock market scamsters and dubious RSS-BJP affiliated companies the hard-earned savings of the Indian people for mercenary profit.

In May this year, the corporate investors withdraw (i e, sold back US-64 units) over Rs 4,000 crore. This confirms the conspiratorial nexus between the UTI and corporate sector. Having inside information about the impending crash of US-64, the corporates withdrew their investments. In this background, it is outright dishonesty on the part of the finance minister to claim that he had no knowledge of UTI developments. If the corporate sector knew, it is ludicrous to believe that the finance minister did not.

It is reported that the Reliance group alone reduced its holding of US-64 units from over Rs 800 crore to just Rs 13 lakh over the last few years. When the corporate sector withdrew its investments in May, the unit was selling at Rs 14.55. Today, the government is offering to buy back not more than 3,000 units from the original US-64 investor at Rs 10 per unit. In the National Stock Exchange (NSE), the unit was quoting at Rs 8.25 today (July 24).

The UTI's involvement with Ketan Parekh's stocks has also exposed another murky dimension of the merciless loot of Indian economy and its small investors. The stock market scam of thousands of crores has ruined millions of small investors. There is an additional manner in which this loot took place.

Readers will recall that through these columns, we had continuously warned that the double taxation treaty with Mauritius was being misused to repatriate huge profit from the country without paying any taxes. It has now been reported that five Overseas Corporate Bodies (OCBs) that have a close link with scamster Khetan Parekh had repatriated Rs 3,677 crore between January 1, 2000 and March 29, 2001. The amazing point is that the five OCBs, put together, had invested only Rs 777 crore. Clearly, using the UTI funds for placements in various companies linked with the scamster, the OBCs could siphon such huge amounts of money out of the country. The finance minister had complete knowledge of this and is personally responsible for keeping this Mauritius route open to favour certain OBCs.

The entire functioning of the UTI (now reports come of similar pressures on nationalised insurance companies like LIC and GIC which had to invest in some of the same dubious companies) clearly shows that the whole system has been geared to provide huge profits to certain chosen people at the expense of more than two crores of small investors.

The presiding deity of such a system, that institutionalises the loot of gigantic proportions, is the finance minister. There is no way he can absolve himself of the responsibility for creating this crisis and ruining the lives of millions. The government must immediately purchase the US-64 units from the people at the price at which it purchased from the corporate sector in May this year. If this means another government bail-out package to the UTI, then so be it. Nothing short of this will be acceptable to the Indian people. The Indian people cannot pay the price for the impunity with which this Vajpayee government indulges in unscrupulous nepotism and consequent mercenary corruption.