)
The government’s disinvestment season is all set to bloom in the next few weeks. The Indian government will sell its shares in select PSUs like Steel Authority of India Ltd, Oil & Natural Gas Corporation, Coal India and NHPC to raise around Rs 40,000 crore by March next year.
The upcoming round of disinvestment is crucial for the government as it will help it to bridge part of its fiscal deficit and raise funds for its money guzzling food and fuel subsidy schemes. Ever since the Cabinet cleared the disinvestment, the shares of these companies are falling. Punters are already selling the shares of these companies hoping to get allotment during the share sale at a discounted price. But the government is not worried.
And the reason is Life Insurance Corporation of India. Ever since the government started its disinvestment programme, LIC has emerged as the unofficial underwriter of its disinvestment programme. If there are no takers for the government’s shares from the savvy investors, LIC – with its huge corpus - always steps in to buy the shares at the price determined by the government. If the market value of these shares fall post disinvestment, LIC has come up with a handy solution to say “we are a long term investor.” There is no other explanation from the insurance giant.
Also Read
LIC's investments are often opaque with no accountability and LIC policy holders seldom get access to investment decisions by the Corporation. As the premium collected by the LIC goes into a huge corpus, it is very difficult to make out whether any particular investment decision is a dud or a winner.
It’s high time LIC investment decisions are made public. LIC thinks its investment decisions are price-sensitive but then it should learn from other pension and investment funds of the world like Calpers and Children's Investment Fund – which publishes details of its investments.
And it is not just about their approach to the disinvestment programme.LIC's role as a large shareholder in many top corporates is also questionable. LIC has seldom raised its voice against questionable steps taken by the companies in which it has invested millions of policy holders hard earned money. This is a dangerous trend. LIC can always demand answers from these companies the way Calpers and Children's Investment Fund seek answers from management when corporate governance standards of companies go astray.
As LIC is controlled by the Indian government, insiders say it’s the finance ministry which asks LIC to make a particular investment and also asks it to keep quiet when things go wrong with private sector companies.
Time has come for LIC to behave transparently and to take private companies to task when corporate governance standards are flouted. LIC should not forget that they are the custodians of funds collected from millions of policy holders and their investments are at stake.
