Standing Committee on Finance headed by former finance minister Yashwant Sinha, has asked Insurance Regulatory and Development Authority (IRDA) to inquire whether country’s largest insurer Life Insurance Corporation of India (LIC) has breached investment norms and exceeded the limit stipulated by IRDA, while buying Oil and Natural Gas Corporation’s (ONGC) shares during the government’s stake auction.
Committee also said that government is using Public Sector Undertakings (PSUs) as milching cows to bridge the deficit.
Committee also said that, owing to risk factors associated with recent acquisitions of ONGC shares by LIC, 29 crore policyholders of LIC are likely to be adversely affected.
Last quarter, government raised Rs 12,767 crore through auctioning of ONGC shares and LIC has subscribed to a large chunk of the issue. ONGC share sale was subscribed 98.3% and LIC had picked over 84% of the share on offer while remaining was picked by institutional and retail investors.
Following this purchase LIC’s stake in ONGC has gone up to 9.48%. As per IRDA’s investment norms, insurers can’t hold more than 10% stake in any company.
The committee has also expressed its disapproval of the manner of ONGC disinvestment. It said that it was just financial engineering to shift money from one pocket of the exchequer to other.
During FY’12 government managed to raise just Rs 14,000 crore through disinvestment in PSUs as against target of Rs 40,000 crore. In FY’13 government is expecting to raise Rs 30,000 crore through disinvestment in PSUs.
The committee also said that government should formulate a coherent and effective disinvestment policy without diluting the objectives for which CPSEs have been set up.
Committee also said that government is using Public Sector Undertakings (PSUs) as milching cows to bridge the deficit.
Committee also said that, owing to risk factors associated with recent acquisitions of ONGC shares by LIC, 29 crore policyholders of LIC are likely to be adversely affected.
Last quarter, government raised Rs 12,767 crore through auctioning of ONGC shares and LIC has subscribed to a large chunk of the issue. ONGC share sale was subscribed 98.3% and LIC had picked over 84% of the share on offer while remaining was picked by institutional and retail investors.
Following this purchase LIC’s stake in ONGC has gone up to 9.48%. As per IRDA’s investment norms, insurers can’t hold more than 10% stake in any company.
The committee has also expressed its disapproval of the manner of ONGC disinvestment. It said that it was just financial engineering to shift money from one pocket of the exchequer to other.
During FY’12 government managed to raise just Rs 14,000 crore through disinvestment in PSUs as against target of Rs 40,000 crore. In FY’13 government is expecting to raise Rs 30,000 crore through disinvestment in PSUs.
The committee also said that government should formulate a coherent and effective disinvestment policy without diluting the objectives for which CPSEs have been set up.
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