From the year 2011- 2016, LIC bought shares worth ₹ 36,686 crore of various public-sector units.
In India, it is true that government has always twisted the meaning of disinvestment. Rarely any government in India has been able to meet the disinvestment target set up in the annual budget document. Even when disinvestment happens, the ownership is often transferred from one government agency to another.
The best example of this is government selling shares of public-sector undertakings to the Life Insurance Corporation (LIC) of India. From the year 2011- 2016, LIC bought shares worth ₹ 36,686 crore of various public-sector units.
Recently, Insurance Regulatory Development Authority of India has allowed LIC to take up 51 per cent of stake in IDBI bank. As part of the deal, LIC will invest ₹13,000 crore in loss-making IDBI bank. It is notable that the insurance regulator has relaxed its rule of maximum 15 per cent ownership of any company by an insurer.
The total losses of IDBI bank from the fiscal year 2016-2018 are accounted to be ₹13,396 crore. In 2018, the central government pumped an additional ₹10,610 crore in the bank. The primary role of LIC is to work in the best interest of its policy-holders by making profitable investments with their money. Given that, is it justified for it to make enormous investments in loss-making public-sector units?
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Our government is using LIC to bail itself out as it has repeatedly failed to meet its disinvestment targets. As IDBI already has about 28 percent of its total loans as non-performing assets, policy-holders of LIC stand to lose big time in the deal. They will end up paying for the incompetence of our politicians and bureaucrats.
It is time for the government to stop using LIC to bail-out sick public-sector units.
