Can PSU insurers invest in tobacco companies? Bombay HC to decide

The New India Assurance Company also has a 1.7% stake in Hyderabad-based cigarette maker VST

A group of eminent citizens, including Tata Trusts’ Managing Trustee R Venkataramanan and Tata Memorial Hospital’s surgeon Pankaj Chaturvedi, has filed a public interest litigation (PIL) in the Bombay High Court, seeking directions to public sector insurance firms to sell their holding in tobacco companies to protect public health. 

The Specified Undertaking of the Unit Trust of India (SUUTI) (11.1 per cent), along with public sector insurance firms Life Insurance Corporation (14.3 per cent), General Insurance Corporation (1.8 per cent), New India Assurance (1.8 per cent), Oriental Insurance (1.5 per cent), National Insurance Company (1.2 per cent), holds stakes worth Rs 1.07 lakh crore in cigarettes-to-hotels giant ITC. 

Moreover, The New India Assurance Company also has a 1.7 per cent stake in Hyderabad-based cigarette maker VST Industries that is valued Rs 81 crore.  

The five insurance firms, the Insurance Regulatory and Development Authority of India (Irdai), and the Central government have been made respondents in the petition, a copy of which was reviewed by Business Standard.

“While on one hand, the government is committed towards tackling the problem of tobacco and the ill-effects caused by it, the insurance companies, in complete disregard to the government’s policy, continue to invest in ITC," said the petition, filed by seven people. 

It also added that despite the government’s continued commitment to reduce tobacco consumption and undertake initiatives to curb its harmful effects, the acts of five insurers by continuing their huge investments in tobacco companies was against the spirit and intent of the Framework Convention on Tobacco Control, 2003 (FCTC). 

“The petitioners as conscious citizens are seeking directions against the respondent number 1 to 5 (insurers) to divest their shareholding from the tobacco companies and not make such investments in the future. In addition, they pray that the government, as well as the Irdai, be directed to frame guidelines/code of conduct to ensure that such disinvestment takes place and such investments are prevented in the future,” said the petition.