Who's to pay anti-trust penalty imposed on state-run insurers?

The penalty of Rs.671.05 crore imposed on four state-run insurers by the anti-trust panel for manipulation in the bidding process for the Rashtriya Swasthya Bima Yojna of Kerala has raised a curious question: From where will the money be drawn for the fine?

While the Competition Commission of India imposed the penalty on National Insurance, New India Assurance, Oriental Insurance and United India Insurance, the question is: Will it be drawn from the funds of the shareholders of these non-life insurers or from that of policyholders.

The regulator stipulates that fines imposed by it are to be debited to the shareholder fund and not on the policyholders. But the current debate is over penalty imposed by the anti-trust ody over malafide means in selecting service providers for the Kerala's insurance scheme over three years from 2010-11.

The matter was taken up by the anti-trust suo moto on receipt of anonymous information against the four companies. The allegation was that the four companies had indulged in anti-competitive agreements including bid rigging.

"The commission noted the impugned conduct of these companies to have resulted in manipulation of the bidding process in contravention of the provisions of section 3(1) read with section 3(3)(d) of the Act," the CCI said in a statement.

While imposing penalties, the commission noted that the present case related to bid-rigging in public procurement for social welfare schemes, the beneficiaries of which were below the poverty line and poor families. Accordingly, it was taken as a more serious offence.

The penalties imposed was Rs. 162.80 crore National Insurance, Rs. 251.07 crore on New India Assurance, Rs. 100.56 crore on Oriental Insurance and Rs.156.62 crore on United India Insurance.