A Parliamentary Panel has urged the insurance regulator to enquire into Life Insurance Corporation's recent share purchase in ONGC's offer-for-sale.
The Insurance Regulatory and Development Authority (IRDA) should investigate whether LIC has violated any prudent investment norms and exceeded the limit stipulated by them, the Standing Committee on Finance, said in a report tabled in the Lok Sabha on Tuesday.
Of the 42.77 crore ONGC shares put on auction in March, LIC had picked up around 37.7 crore shares, raising its total stake in the company to 9.48 per cent. This had raised eyebrows and some commentators even felt that LIC may have been forced to rescue the ONGC offer-for-sale at the eleventh hour.
Disinvestment policy
The panel, headed by senior BJP leader, Mr Yashwant Sinha, in a larger context, also recommended that the Government should formulate a coherent and effective disinvestment policy without diluting the objective for which Central Public Sector Enterprises (CPSEs) have been set up.
On the ONGC offer-for-sale through auction, the Committee expressed disapproval of the manner in which the divestment was dealt with. “It was nothing but mere financial engineering to shift money from one pocket of the exchequer to the other”, it said.
Criticism & response
Coming down heavily on the Government for the way it has handled disinvestment, the Committee said it cannot but conclude that the objective of divestment has been reduced to a mere deficit-bridging exercise, treating CPSEs as “milching cows” without using it (divestment) as a long-term instrument to improve the functioning of PSUs.
Meanwhile, the Finance Ministry, in a written reply to the Panel, said the panel's conclusion that LIC was forced to rescue ONGC stake sale at 3.29 p.m. was not correct. LIC is a continuous buyer of ONGC shares and even before this offer their shareholding in it was 5.067 per cent, the Ministry noted.
Not fair
To say that LIC was forced is not fair to its goodwill either, the Ministry pointed out. “LIC is a dominant domestic player in the capital market and normally makes big investments in public offerings, be it from private sector or Government sector. Even by global size, LIC is a formidable investor and if only a few foreign investors are found to compete with it, it should not be taken adversely,” it said.
krsrivats@thehindu.co.in