So far, asset management companies had to launch a new closed-ended ELSS every year to provide tax-breaks to investors. The existing species of ELSS have a duration of 10 years with repurchase facility after three years.

Under the open-ended avatar, the three-year lock-in under ELSS will continue and commence from the date of allotment or holding of units as the case may be. Earlier, the three-year lock-in came into effect from April 1 of every year.

``It is a step in the right direction and in line with the series of measures aimed at reviving the markets,'' Unit Trust ofIndia chairman PS Subramanyam said. ``Now, these schemes will be available throughout the year to investors,'' he added.

Subramanyam pointed out that UTI would approach the Securities and Exchange Board of India to make changes in the draft prospectus of Master Equity Plan '99 in order to make it open-ended. ``We are waiting for the details from the government and proceed accordingly,'' he said. Whether mutual funds will be able to launch open-ended equity-linked saving schemes in the current fiscal will depend on the notification from the government. ``This requires minor procedural changes and was hanging fire for quite some time. It should now be promptly carried out so that open-ended tax savers are launched in fiscal 1999,'' said an analyst.

If the government order comes into effect from the current fiscal, many funds are likely to make an attempt to launch these tax-saving plans. So far, only UTI and Kothari Pioneer have filed their draft prospectuses with Sebi for ELSS while Birla AMC is expectedto announce shortly its plans for an ELSS this year. Kothari Pioneer, for one, has made final arrangements for the launch of KP Taxshield '99. ``It all depends on the notification and we will proceed accordingly,'' said an official with the mutual fund.

While the announcement to make ELSS open-end has finally come through, the mutual fund industry wants the government to extend tax concessions under ELSS to all open-end growth funds. ``Like tax breaks under 54EA and EB in income funds, the goverment should extend benefits under section 88 of the IT Act to existing open-end growth funds,'' said an official with a private-sector AMC.

ELSS were launched in 1992 to encourage participation from middle class investors in the equity market. Under this scheme, investments up to Rs 10,000 are entitled for tax rebate of 20 per cent of the investment made. For instance, if tax liability of an investor is Rs 3000 and he invests Rs 5000 in an ELSS, 20 per cent of Rs 5000 or Rs 1000 would be reduced from his taxliability, thus bringing it down to Rs 2000.

However, the lacklustre performance from these schemes has resulted in investors turning away from these instruments. The net asset value has even gone below par in some cases. While falling markets is one reason, over a longer time frame of 3-5 years, returns from these funds have not even matched those of indices. For instance, in the past five years, the average return of tax plans has been down 6.66 per cent while the BSE Sensex has fallen by 2.76 per cent on an annualised basis.

As a result, the number of funds launched has fallen drastically from 9 and 14 in 1995 and 1996, respectively to 5 in 1998. Collections have nosedived from Rs 1449 crore in 1995 to a paltry Rs 24 crore in 1998. Besides, there have been sizeable redemptions from these funds. ``It has long been a one-way street but now with ELSS going open-end, investors can both enter and exit at a suitable time,'' said an analyst.