Amid concerns being expressed by a Parliamentary panel on purchase of ONGC shares by LIC, a senior government official on Thursday said the state-owned insurer is a professional body and acts in the interest of policy-holders.
“LIC is a professional body and is used to investing funds in company. They do it in the best interest of customers rather than impacting their policy-holders negatively,” a senior official in the Department of Disinvestment told PTI.
The Standing Committee on Finance, headed by senior BJP leader Mr Yashwant Sinha, had earlier this week pulled up Life Insurance Corporation (LIC) for buying ONGC shares during the government stake auction and had also asked insurance regulator IRDA to enquire whether LIC has breached the investment norms.
“Owing to risk factors associated with the recent acquisition of shares of ONGC by LIC, 29 crore policyholders of LIC are likely to be adversely affected,” the Committee had said in a report.
When asked if the Standing Committee’s report would deter LIC from participating in future disinvestment programmes, the official said: “I do not think that LIC, which has been in the business for so long, will feel shy of investing in PSUs in future“.
LIC has been buying stakes in many companies, both public and private sector. But concerns were raised after it picked up a substantial equity in ONGC in the recent government auction, taking its total stake in upstream oil major to 9.48 per cent.
LIC invests large sums in companies and during the current fiscal it proposes to invest about Rs 2.25 lakh crore, of which Rs 60,000 crore will be in equities.
Last month, the government raised Rs 12,767 crore through auctioning of shares in oil major ONGC and state-run LIC had subscribed to a huge chunk of the issue.
While the ONGC share sale was subscribed 98.3 per cent, LIC had picked up over 84 per cent of the shares on offer. The remaining was bought by institutional and retail investors.
The Committee had also expressed its disapproval over the method of ONGC disinvestment and said, “it was nothing but mere financial engineering to shift money from one pocket of the exchequer to the other“.
LIC, the official said, “saw value accretion through investment in ONGC and took a decision to buy the stakes. They buy shares in private sector companies as well. Nobody forces them to buy equity“.
As against the budgeted target of Rs 40,000 crore, the government had raised about Rs 14,000 crore through disinvestment in public sector undertakings (PSUs) in 2011-12 fiscal.
For the current fiscal, the government targets to raise Rs 30,000 crore through stake sale in PSUs.
The Committee had also regretted that the government is using PSUs as “milching cows” to bridge the deficit.