For a cash-strapped government struggling to keep the ballooning fiscal deficit within prudent limits, the easy way out when nothing else is working in its favour is to flog the thoroughbreds in the PSU stable. The Life Insurance Corporation of India is a dependable milch cow. To enable the LIC to participate in the disinvestment process and provide much needed resources to make sure the target of raising Rs 30,000 crores within this fiscal year is achieved, the government has mandated that LIC can invest upto 30 per cent in a single company against the IRDA ceiling of 10 per cent.
Commenting on this move, LiveMint has observed: “The Rs.2.25 trillion pot of retail money managed by LIC that is in equity can be of help as it was in the ONGC disinvestment. But should retail money be forced into public sector stocks”? Legally, the government can supersede the actions of the regulator under the LIC Act but such a move sets a bad precedent and competitors of LIC have every reason to be aggrieved if they are not allowed a level-playing field!
Without the support of LIC, the government is likely to fail in meeting the Rs 30,000 crore disinvestment target for 2012-13 which will be an encore of its performance in the previous year when it managed to raise Rs 14,000 crore only against a target of Rs 40,000 crore.
The corporation which has an investment portfolio of over Rs 8 lakh crore plans to invest around Rs 60,000 crore in the equity market in 2012-13, according tomoneycontrol.com The fund managers at LIC should be allowed to function without being reduced to puppets in the hands of the ministry of finance. This way the government will also ensure that they are accountable for their decisions to their stakeholders!