TDB suffers Rs 1.6-cr loss due to UTI

Kochi: The Travancore Devaswom Board (TDB) is reported to have suffered a loss of Rs 1,60,82,797 by investing Rs 7 crore in the Unit Trust of India (UTI) for three years from 20 July 1998. The decision of the previous board to invest in UTI is said to be highly irregular.

According to an inspection note submitted by the TDB assistant secretary-general, the board resolved to invest Rs 5 crore in the US 64 scheme and Rs 2 crore in Monthly Income Plan (MIP 98 III) on 16 July 1998. The income from the Rs 2 crore invested in MIP 98 was 13.5 per cent annual interest.

The face value of a unit purchased under US 64 was Rs 10 per unit. The board bought 35,71,428.571 units at Rs 14 per unit. The premium per unit was Rs 4. The board later sold 11,23,600 units for Rs 13.35 per unit on 13 August 1999.

The 11,23,600 units purchased for Rs 1,57,30,400 at the rate of Rs 14 per unit was sold for Rs 1,50,00,060 at the rate of Rs 13.35 per unit. The board, thus, incurred a loss of Rs 7,30,340. The board withdrew Rs 5 crore on 19 July 1998 after closing the fixed deposit for purchasing the units. TDB had been getting 12 per cent interest for the fixed deposit.

Had TDB retained the fixed deposit, the interest accrued would have amounted to Rs 1,56,02,457. The investment in UTI did not yield any returns and also had to suffer heavy loss, the note says.

Moreover, there is no mechanism to realise the value of the 24,47,828.571 units retained by the board. The loss in this score itself amounts to Rs 3,42,69,600. The note specifically states that it was not practically viable for institutions such as TDB to invest in units and shares as their net asset value (NAV) keeps on fluctuating frequently. The only income from the investment being the increase in the purchase value of the unit in the share market, such investments will always be a gambling, the note says.

The face value of the unit under the "US 64" scheme purchased for Rs. 14 has come down to Rs. 10. The board would derive any benefit only if the share value goes up in the market. Without a mechanism to monitor the fluctuations in the share market, it would be impossible to make profit from the investment and the board does not have such a mechanism at present, the note says.

"The provocation for the investment of such a huge amount in the units leads to suspicion, and some foul play might have occurred," the note says. UTI is on the verge of collapse and even the Centre is finding it tough to save the company from that catastrophe. TDB was reported to have acted on the recommendations of the then finance and accounts officer.

The recommendation to invest in units was "highly irregular, unwanted and uncalled for," the note says. Since the day-to-day functions are being closely watched by the Kerala  High Court, the assistant secretary has recommended TDB to bring the matter to the court's notice.

If the present board fails to bring up the issue before the high court, there is every possibility to attract adverse remarks for hiding such an irregular financial deal, the note says.