The government has ruled out selling shares in state-run insurance companies, following fears that a new provision in the Insurance Bill may result in stake sale in public sector general insurers.
The Bill introduced in 2008 had proposed amendments to the General Insurance Business (Nationalization) Act to allow GIC and other companies to raise their capital to meet regulatory requirements and expansion needs. Now, a new clause is proposed to be inserted saying, “Provided that the shareholding of the Central government shall not be less than 51% at any time.” Government officials told TOI that the provision was not meant to provide for stake sale in GIC or the four general insurers — New India Assurance, United India, National and Oriental Insurance — but enable them to raise more equity through fresh issue of shares, which will expand the capital base.
Soon after the amendments were circulated to lawmakers on Thursday, members fromTrinamool Congress demanded that the
government put in place safeguards to ensure that the fund-raising is only to meet specific purposes and does not turn into a tool to raise money by stake sale by companies.
During UPA’s term, there was discussion in the disinvestment department on selling equity in some of the public sector general insurance companies. But there was no progress on the issue and the idea did not move beyond discussion stage.
In the run-up to the Narendra Modi government’s first Budget, some financial sector representatives such as Kotak Mahindra Bank vice-chairman and MD had suggested that the Centre could raise funds by listing Life Insurance Corporation, but the idea clearly did not find favour with the administration.
Source : Times of India
Date : 1-8-2014