Selling Of LIC Is Illegal, Unconstitutional And Against Interest Of People Of India, says EAS Sarma
Many other eminent personalities echo same sentiment at press conference organized by Thomas Franco, Former General Secretary, AlBOC and People First
EAS Sarma, Former Secretary, Ministry of Power & Economic Affairs, Govt of India, in the online press conference held today (27th January 2022) on the impending Initial Public Offering (IPO) of up to 10 per cent of the government’s stake in the Life Insurance Corporation (LIC), purportedly to generate resources for the government. The Peoples Commission has been vocal against the privatisation of PSUs and notes, “It is a matter of concern that the proposed IPO is happening in the midst of a pandemic, which has upended millions of livelihoods and which requires an immediate expansion of social protection measures, a task that the LIC has performed commendably over the last several decades.
The Finance Minister had announced in her 2021 budget speech about this disinvestment of government stake in the Life Insurance Corporation of India (LIC). According to news reports, the LIC IPO Prospectus is likely to be issued in early February 2022. The Commissioners feel it is a disastrous step that is against the best interest of a legacy institution like the LIC, the interest of the policyholders and the country at large.
“Sometimes we take for granted something that we see everyday and that is true of the LIC. Lot of people don’t appreciate the work of this unique corporation. Nothing like this exists anywhere in the world. Those who say govt units are not capable of being enterprising and innovative, the answer to them is LIC. Its simple logo and slogans are a household name in India,” said V Sridhar (Senior Journalist).
“We have decided to go on a 2 day strike, on 23-24 February, along with other trade unions to oppose the LIC IPO and the privatisation policy of govt. We are planning a series of actions before the LIC IPO” informed Amanulla Khan, Former President, All India Insurance Employees Association.
“Government is wanting to disinvest from public sector, but it is investing in Vodafone to help Aditya Birla. Whose interest they are protecting is very clear,” said Dinesh Abrol (Retired Professor, National Institute of Science, Technology & Development Studies.
The press conference highlighted that PSUs are constituted through Article 19 and their role has been fulfilling many duties in the directive principles of state policies ensuring economic and social justice; the economic system does not result in the concentration of wealth. PSUs are also instrumental in implementation of Article 12 of the constitution. Hence, by selling the PSUs the government is not only selling the family silver but also shrinking the space for welfare. He also said that the stated reason from the government that it is going to invest the additional revenue gained by selling public assets in welfare programmes is false.
LIC has been an unique institution in India that started as a trust with a mere 5 crore capital from the government and has over six decades policy base of 40 crores and a premium income more than 4 lakh crore and its assets valued at 38 lakh crore. It is the only institution where though the government owns it, 95 percent of its surplus is distributed among the policy holders! It assured policy holders of a saving instrument which was safe, secure and guaranteed over a long period of time and it has never failed to distribute its bonuses. When the Capital was increased to 100 crores Rs. 95 crores was contributed by policyholders. The entire Reserves and Surplus has been contributed by policyholders. The solvency margin of Rs. 1,86,000 crores as on March 2021 is also contributed by policyholders fund.
So, technically the government may own it, but ethically and morally it cannot sell off something like LIC unilaterally. The IPO of LIC non-transparent and marred with fallacies. No valuation of embedded value can measure
the goodwill that LIC enjoys among the people. It is a sham that the task of valuation of LIC has been given to a US company that has no experience in valuing something as unique as LIC. The government states that 10% would be reserved for the policy holders. But, given that the average ticket size in LIC is so small, most of the policy holders have no wherewithal to participate in this float. So, “this reservation for policyholders is nothing but a facade. Policyholders as a class are going to be cheated,” said V. Sridhar. He also raised doubts as to whether the sovereign guarantee would continue after the privatization.
With the IPO of LIC the government has fulfilled the Recommendations of Malhotra Committee against which the LIC employees union has been campaigning for the last 26 years. The committee had recommended that the insurance industry should be opened up for private competition and the share of government be reduced to 50%. The industry was opened in 2001 but the private competition could not even make a dent in the market that even during the pandemic new policies increased by 554%. But now the IPO of LIC will be destroying LIC. 95% of the profit from even non profit policies is shared with policyholders of LIC as bonus. The share insolvency margin is also given back to the policyholders as final bonus. The question is will this continue?
Already government has decided to reduce it to 90% and not share profit from non profit policies stated Mr. Amanullah Khan. LIC has 13 lakh agents and 88% of policies are being sold by agents. Whereas, for the private sector, around 70% of policies are being sold through banks. Therefore, valuation of agency force of LIC and good will of the policy holders is incalculable. When the entire corporation has expanded through policy holders’ money, the value of LIC’s assets at present is much more than the value of its liability. “Will the government return that money to existing and past policyholders or pass on the wealth of policy holders to the new shareholders?” asked Amanullah Khan.
TO WATCH VIDEO OF THE PRESS CONFERENCE, PLEASE CLICK THE LINK GIVEN BELOW :-
It plays a crucial role in funding the infrastructure and social sector policies of the state. It has immense rural reach and the average size of the policy is small, meaning most of them are small policyholders. “It is unfortunate that the government is selling an asset and using it for expenditure that may not have any social value,” said EAS Sarma.
The Press Conference was introduced by Thomas Franco (Former General Secretary, All India Bank Officers’ Confederation and People First). He introduced People First as a platform of Trade Unions, People’s Movement and Civil Society wanting change in the present path of economy, development, politics and who advocate for a decentralized, distributed democratic path where Public, Public Sector and Public Services have a major role. He also introduced the People’s Commission as an independent body composed of eminent academics, jurists, erstwhile administrators, trade unionists and social activists who stand against the moves towards privatization or monetisation of public assets.
He spoke of the several reports and statement that the Commission has released through detailed deliberation on issues like the sale of CEL, the SBI-Adani capital deal, and so on. Prof. Dinesh Abrol concluded the
meeting emphasizing the need to constantly reiterate the question as to in whose interest the government is working – the people’s or the corporate’s.
