The parliamentary standing committee on finance has asked the insurance regulator, Insurance Regulatory and Development Authority (IRDA), to inquire whether Life Insurance Corporation of India has breached the investment norms while buying shares of state-owned ONGC Ltd during the auction of the government stakes.
“Owing to risk factors associated with the recent acquisition of shares of ONGC by LIC, 29 crore policyholders of LIC are likely to be adversely affected,” said the committee.
The committee has expressed its disapproval of the manner of ONGC disinvestment and said, “it was nothing but mere financial engineering to shift money from one pocket of the exchequer to the other”.
Last month, the government raised R12,767 crore through auctioning of shares in ONGC and state-run LIC had subscribed to a huge chunk of the issue.
“The committee recommends that IRDA should inquire into this issue and investigate as to whether the LIC has violated any prudent investment norms and exceeded the limit stipulated by them.”
While the ONGC share sale was subscribed 98.3%, LIC had picked up over 84% of the shares on offer and the remaining was bought by institutional and retail investors.
Following this, LIC’s stake in ONGC has gone up to 9.48%. As per the IRDA norms, insurers cannot hold more than 10% stake in any company.
The panel, headed by former finance minister and senior Bharatiya Janata Party (BJP) leader Yashwant Sinha, also regretted that the government is using central public sector enterprises (CPSEs) as “milching cows” to bridge the deficit.