Divestment Aimed to Reprise the Fiscal Deficit!

Government and policyholders on tenterhooks after the former plans to sell its 33 crore LIC Stake.

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While presenting the Budget on the floor on 1st February, the Finance Minister‘s announcement of stake sale through IPO, took its employees by a shock. This being the ginormous share sale in the country’s IPO history. This led to the surfacing of the LIC Act that clearly stated LICcan’t be divested in any case. An estimate reveals achievement of merely Rs 18,000 crore so far through its ongoing disinvestment program as against the full fiscal year’s target of Rs 1 trillion.

What does the government promise?

Union Minister of State for Finance, Anurag Thakur in a media report stated that the government will protect the interests of policyholders of LIC. ” Listing of LIC will help bring in greater transparency, public participation and also deepen the equity market,” he said.  The LIC’s gross NPAs currently stand at 6.10 percent for the first six months (April-September) of 2019-20. It always maintained stable 1.5-2 percent gross NPAs, it adds.

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Status of LIC

LIC has got 33 crore policyholder and reigns as the market leader in the life insurance space. In 2016, IRDAI asked the life insurers to stop selling indemnity health insurance products after the arrival of specialized health insurers in history.

TPT Policy Advocacy & Recommendations

  • With the arrival of the pandemic, the Indian government has reached bankruptcy of mind. LIC is the only trusted saving firm which the Indian population relies on despite poor returns. Selling its stake will impact the government exchequer positively but it will hamper the trust of the nation. Though the government is only selling its stake in the Insurance firm, people will develop governance issues in the near future.
  • Moreover, it is the prerogative of the Government to disinvest or not, but if it does; it should disclose its IPO strategies. Is it ready with its SoP to take forth the sale or are the deal returns determined to vanish in thin air? The government seems to be using LIC to bail out the PSUs and balance its fiscal deficit. But why is LIC being savaged?  Instead of selling its stakes, it would have been beneficial enough if it would consider concessions on long-term capital gains and recession of interests.
Summary
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Divestment Aimed to Reprise the Fiscal Deficit!
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Government and policyholders on tenterhooks after the former plans to sell its 33 crore LIC Stake.
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THE POLICY TIMES
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