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Wednesday, Feb 04, 2004

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Lower grants for IFCI

Suresh Krishnamurthy
Aarati Krishnan

Post-announcement of IFCI merger with Punjab National Bank, the Government appears to have decided to reduce the grant payable to IFCI. Allocation to IFCI has been pegged at Rs 226 crore for 2004-05 compared to the Rs 1,573-crore grant made in 2003-04. IFCI had earlier indicated that this Rs 1,573 crore formed part of a total grant of Rs 4,697 crore payable over a few years. Now, however, the size of the grants appears to have been reduced substantially.

6.6 pc bonds for UTI investors

The Special Undertaking of the Unit Trust of India (UTI) had recently indicated that two of its schemes would be foreclosed. It, however, appears that seven assured return schemes would be foreclosed in 2004-05. Investors in these seven assured return schemes are going to be offered 6.6 per cent bonds just as investors in US-64 were offered 6.75 per cent tax-free bonds.

No return of capital for banks

Only recently the Finance Ministry had categorically stated that it was no longer going to accept return of capital from banks. Budget documents confirm this intention. No allocation has been made to accept capital returned by banks.

Lower subsidy for urea

Domestic producers of urea may have to tighten their belts in the coming year, if the signals from the expenditure Budget 2004-05 are anything to go by. After overshooting its Budget on subsidy payments to domestic urea producers by around 8 per cent in 2003-04, the Government appears to be planning to tighten its purse strings next year. It is hoping to spend Rs 8,143 crore towards subsidy on indigenously produced urea in 2004-05. This is practically unchanged from this year's Rs 8,139 crore.

This indicates that the Government is not budgeting for any further escalation in input costs next year, which would push up the subsidy bill. It also indicates that the Government may consider the option of meeting any increase in domestic demand through imports. In a normal monsoon year, urea demand can be expected to grow by 5 per cent to 6 per cent; yet there is no increase in the subsidy set apart for domestic urea producers. Instead, the Government has provided a sum of Rs 473 crore in 2004-05, towards meeting subsidy on imported urea. In the current year, no urea imports were contracted on account of high international prices.

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