Employees' Unions Oppose Govt Plan to Sell Stake in LIC

Andrew Cummings
February 2, 2020

Sitharaman announced in the Parliament, "The government proposes to sell a part of its stake in LIC through IPO". An IPO refers to the process of offering shares in the stock market.

In what could be seen as a leap in disinvestment ambitions, the Centre has made a decision to go for the public listing of the country's largest financial institution, the Life Insurance Corporation (LIC).

In her Budget speech, Sitharaman also proposed that the government will sell its stake in IDBI Bank to private investors and amend Banking Regulation Act to strengthen co-operative banks.

The government has set a divestment target of Rs 2.1 lakh crore for FY21 compared with Rs 1.05 lakh crore target for the ongoing financial year.

"For BE 2020- 21, disinvestment receipts are budgeted at Rs 2,10,000 crore which is inclusive of Rs 90,000 crore from sale of Public Sector Banks and other Financial Institutions".

For three years between 2016-17 and 2018-19, the government exceeded the BE targets for disinvestment.

Till December 2019, the government has received only Rs 18,000 crore worth of disinvestment proceeds. This is a huge jump in the budget estimate for 2020/21 given the government has to revise downward its 2019/20 budget estimate of Rs 105,000 crore to Rs 65,000 crore.

In the current fiscal, the government had announced there could be strategic disinvestments where the undertaking is still to be retained in government control, to go below 51 percent to an appropriate level, on a case to case basis. With plans afoot for privatisation of BPCL, Container Corporation of India, Shipping Corporation of India and Air India, the next year is going to see the government sell its equity in several state-owned companies at an unprecedented scale. "We are raising it to Rs 5 lakh per depositor".

Sitharaman also said that the deposit insurance cover will be hiked. The Centre now holds 47.11 per cent, while LIC is the majority shareholder with a 51 per cent stake in IDBI Bank.

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