This Govt Insurance Firm Will Be Sold To Private Firms Before PSU Banks Privatization

United India Insurance could be next on the table for privatisation.

In this year’s Union Budget speech, Fin. Min. Nirmala Sitharaman had announced the administration’s plan to privatise 2 PSBs and a general insurance co, all part of a larger plan to privatise more PSBs.

For the present fiscal, the Union Budget had announced its divestment target of Rs 1.75 lakh crore. 

It has emerged that insurance companies will probably be privatised before the banks.

Public Sector Insurers

India has 4 public sector general insurers. They are:

• National Insurance Company Limited
• New India Assurance Company Limited
• Oriental Insurance Company Limited 
• United India Insurance Company Limited

Bill Amendments Passed To Facilitate Privatisation

The General Insurance Business Nationalisation (Amendment) Bill, 2021, was recently passed which would allow the Centre to dilute its stake below 51%. in state-owned general insurers.

The bill amends the General Insurance Business (Nationalisation) Act first passed in 1972.

Purpose Of Amendments

The amendment was required in order to address matters such as:

• Inviting increased private participation in public sector insurance companies
• Increase the level of insurance penetration and consequently social protection
• Handle the interests of policyholders in a better manner
• Contribute towards faster rate of Indian economic growth 

Changes In The Bill

A section was removed which mandated the government to hold a minimum of 51% of the equity capital in public sector insurers.

A new section was introduced which allows the Centre to give up control of a public insurer from a given date.

Privatisation Delayed To Next Fiscal

The completion of privatisation of two state-owned banks and one general insurer could be delayed to as late as 2022-23.

The delay comes about since the process of privatisation of state-owned financial companies is a “new territory in terms of policy and a reversal of bank nationalisation.”

The finance minister also has to make good on its promises to the employees in these companies regarding job security.

This, along with “framing the contours of the deal and finding a suitable buyer”, will take up a lot of time.

Sequence Of Steps In Determining New Buyer

After some buyers are shortlisted, the names have to be passed over to a group of secretaries led by the Cabinet Secretary.

In the next step, the proposal goes to an empowered group of ministers.

In the final step, it is submitted to the Union Cabinet headed by Prime Minister Narendra Modi.

Govt On Track To Meet Divestment Target

However, the government is confident of meeting its divestment target of Rs 1.75 lakh crore this financial year.

It aims to achieve this through the sale of shares in:

• Air India
• Bharat Petroleum
• Shipping Corporation of India
• Container Corporation of India
• Pawan Hans
• BEML
• Neelachal Ispat Nigam Ltd.
• IDBI Bank 
• Listing of Life Insurance Corporation of India

Privatization Of Govt Insurance Firms: Critical Bill Passed In Rajya Sabha, Opposition Not Happy