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Wednesday, November 21, 2012

LIC allowed to buy up to 30% equity in a company

Hard pressed to meet the Rs 30,000 crore disinvestment target, the Finance Ministry on Wednesday permitted the state-owned Life Insurance Corporation to invest up to 30 per cent in a company as against the earlier ceiling of 10 per cent.

LIC can invest up to 30 per cent of a company’s paid-up capital. Earlier it could invest up to 10 per cent,” Financial Services Secretary D K Mittal told reporters here.

The notification relaxing investment norms for LIC has been issued, he added. The new norms will enable the cash-rich LIC, which invests around Rs 50,000-60,000 crore in equity annually, to pick up higher equity in state-owned companies during the disinvestment process.

Insurance regulator IRDA, however, was against LIC picking up more than 10 per cent equity in a company. It wanted LIC to stick to the norms applicable for private insurers.

The government’s decision is apparently aimed at pushing through the disinvestment process which had so far remained a non-starter.

The government in the budget for 2012-13 had proposed to raise Rs 30,000 crore from stake sale in PSUs.

Finance Minister P Chidambaram in a recent interview to PTI had expressed the confidence that government would endeavour to be as near the target as possible.

The government proposes to sell equity in several state-owned companies like Nalco, Hindustan Copper, SAIL, BHEL, MMTC and Oil India Limited (OIL). It is also planning to sell residual equity in companies privatised earlier.

In view of the subdued tax collection and subdued revenue realisation, the Finance Ministry had raised the fiscal deficit target for the current fiscal to 5.3 per cent of the Gross Domestic Product (GDP) from 5.1 per cent estimated earlier.


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