PSU general insurers need free hand: Unions
Govt is not privatising one of its general insurance companies, but bringing in enabling provisions so that there is public/common people participation in the company, says FM
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Demanding functional autonomy and opposing privatisation, the major unions in the government owned general insurers are not buying Finance Minister Nirmala Sitharaman's views about the reasons for the government amending the General Insurance Business (Nationalisation) Act, 1972.
The unions also do not rule out a Lakshmi Vilas Bank (LVB) style transfer of a government insurer. On Friday the central government brought in The General Insurance Business (Nationalisation) Amendment Bill, 2021 in the Lok Sabha.
Speaking in the Parliament Sitharaman said the government is not privatising one of its general insurance companies, but bringing in enabling provisions so that there is public/common people participation in the company. She said the private-public participation will bring in more resources from the market and for company's faster growth.
"If raising money from the public is the main reason for the amendment, then providing full functional autonomy to the company is the best option. I don't think this government is interested in full autonomy," Sanjay Jha, Secretary, Standing Committee (General Insurance), All India Insurance Employees' Association (AIIEA) said. The four PSU non-life insurers are: National Insurance Company Ltd, The New India Assurance Company Ltd (already listed), The Oriental Insurance Company Ltd and United India Insurance Company Ltd.
Sitharaman had earlier said one of the unlisted non-life insurers will be privatised. As regards mobilising capital from the public, the two listed companies General Insurance Corporation and New India Assurance found it difficult when they came out with their initial public offer, the union officials said. At the bourses, the scrip of New India Assurance is traded at a huge discount as compared to its private sector rival. The market discounts a PSU scrip owing to government's control. "Who will be interested is the question. The foreign direct investment (FDI) has been increased from 49 per cent to 74 per cent. But the foreign promoters of 15 general insurers have not increased their stakes even to 49 per cent," K. Govindan, General Secretary, General Insurance Employees' All India Association (GIEAIA) said.
Officials of PSU companies are open for full functional autonomy for the companies followed by an IPO if funds are needed. The amendment bill could be for enabling the environment so that talks can be held between the central government and the potential bidders in a sincere and an efficient manner, is one view.
As to the objects of the amendment the government said: (i) to omit the proviso to section 10B of the Act so as to remove the requirement that the Central Government holds not less than fifty-one per cent of the equity capital in a specified insurer;
(ii) to insert a new section 24B providing for cessation of application of the Act to such specified insurer on and from the date on which the Central Government ceases to have control over it; and
(iii) to insert a new section 31A providing for liability of a director of specified insurer, who is not a whole-time director, in respect of such acts of omission or commission of the specified insurer which has been committed with his knowledge and with his consent.
On Friday, Sitharaman also said the private general insurers have greater penetration and raised more money from the market and therefore give a better premium for public and innovative covers. On the other hand, the government insurers are not able to perform as they are short of resources.
Responding to that Jha said: "In 2019-20 the four PSU general insurers issued about 7.33 crore policies. The numbers of last fiscal will be similar. One should compare this with the number of policies issued by the private players to calculate insurance penetration."
