"The accounting norms for plantation firms will encompass aspects of the way in which accounting is being done by mutual funds and by corporate bodies in general. These accounting principles will also evolve over time. We have seen the way collective investment schemes are regulated and managed in Australia and New Zealand. We are going to make use of this information while making the final guidelines but we will not ditto the structure," said committee chairman SA Dave.

"The plantation companies and the collective investment schemes were very different projects all together, in the sense that they are long-term projects. In these projects, for example, the first cutting (of the plantation) is at the end of 6 years, then the second at the end of 12 yearsand probably the last at the end of 20 years. Now, throughout this period the cost on maintaining these plantations will go on increasing without much revenue generation. Thus, it is imperative to keep these points in mind while framing the guidelines," said Dave.

Since these projects are long term in nature with 6 to 20 year cycles, there is a need to look into how the market valuation can be done, he said. "We have to find the cumulative costs incurred up to the last year of the project and then find the distributable surplus. When the distributable surplus can be determined then a kind of market evaluation can be done," said Dave.

"For example, six years is a fraction of the total value that will be cumulated at the end of 20 years and till then there will only be a negative surplus with these firms. So, how should the valuation be done?" he pointed out.

The valuation cannot be done everyday as in the case of mutual funds which invest in negotiable instruments and which can be marked to market, saidDave. "In the case of plantation companies, the evaluation will have to be on an yearly basis with the help of forest advisory committees,"observed Dave.

On the regulation front, Dave said that the norms would include the criterion of having a minimum net worth for floating a plantation scheme. "Then, when a plantation company wants to float a new scheme it will have to make certain disclosures in its prospectus to Sebi. These disclosures will be governed by the Sebi guidelines," said Dave.

Dave said that all the three reports -- the final draft report, the accounting norms report and the report for regulating collective investment schemes -- were in place and now the committee will meet again on December 28 to put the three aspects together and evolve the final report.

On the way in which these firms will be required to comply with the accounting aspect of regulations, Dave said that these norms have been drawn from old and time-tested concepts.

The governing structure would involve a two-tierstructure in which the obligation for the plantation company will be both with the trustee and the management of collective investment schemes.

"Everybody's obligations will be properly outlined by Sebi in its regulations. Also, the norms, in case if there is unsatisfactory performance and in case of complaint, will be properly laid down," said Dave.