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FEDERATION OF LIC CLASS I OFFICERS’ ASSOCIATIONS
NATIONAL
FEDERATION OF INSURANCE FIELD WORKERS OF INDIA
ALL INDIA INSURANCE EMPLOYEES’ ASSOCIATION
14.07.2020.
Government initiates process for LIC IPO
We the Officers and employees of LIC of India are deeply upset with the reports that the
government has initiated the process of selling parts of its stake in the Life Insurance Corporation of
India.
The Department of Investment & Public Asset Management (DIPAM) under the Finance
Ministry has issued a Request for Proposal (RFT) regarding engagement of Pre-transaction Advisors
for assisting DIPAM in the processes related to the IPO of LIC.
Thus the government has set in
motion a process to sell a portion of its stake in the most prestigious public financial institution of
the country.
The LIC is created through an Act of Parliament and it is unfortunate that a move which will have a
wide ranging impact on the policyholders and the national economy, the government is proceeding
ahead without a thorough discussion in the Parliament.
You are aware of the important role LIC has
played in industrialization of the country since its inception in 1956 and continue to play in the
nation building activities.
We would also like to mention that the growth of LIC, its expansion and
emergence as the largest insurer in the world in terms of number of policyholders and claim
settlement has been done entirely through resources generated internally.
The government did not
make any additional contribution to the initial capital of Rs. 5 crore in 1956 which was enhanced to
Rs.100 crore in 2011 due to Regulatory issues.
On this meagre capital base, LIC today is managing its assets in excess of Rs.32 lakh crore.
Since this
expansion has taken place through funds collected from the policyholders, LIC has functioned more
like a Mutual Benefit Society. This is an important fact that has been overlooked while deciding to
sell a portion of stake in LIC.
The objectives of nationalization of life insurance business by taking over 245 private insurers were
to mobilize small savings and convert them into capital for long term investment in infrastructure
while at the same time giving total security to the policyholders and ensuring decent returns. The
LIC has admirably lived to these objectives.
The equity sale by the government which may ultimately
lead to privatization kills these very objectives. This move will make the concept of ‘People’ Money
for People’s Welfare’ give way to profit maximization for the shareholders.
This is neither in the
interests of LIC’s 40 crore policyholders nor the national economy. It is widely acknowledged by the
eminent economists that domestic savings play a very important role in the national economies and
hold the foreign capital is a poor substitute for domestic savings.
The situation where the country
needs huge resources for development it is necessary that the government should exercise its
control over the domestic and more importantly the household savings.
The work force of LIC has made enormous contribution to create this finest financial institution have
been opposing the proposed sale of a portion of government holding for valid and justifiable
reasons.
The LIC must remain 100% under the control of the government. It has been historically
proved that only where the state controls the peoples’ savings, they can be channelized to national
development. The control of private sector on domestic household savings will be for private profit
maximization.
Considering the fact that our country is still a low income country, it is important for
the insurance sector to remain a monopoly of the government for cross subsidization and meeting of
the poorer and vulnerable sections of the populations. Our arguments against the equity sale are
not any partisan interests but based on the interests of the national economy.
We would like to stress again that equity of LC will severely impact the economy and vulnerable
sections of the Indian people.
The social objective of providing insurance to the weaker section will
receive a severe setback. The aim to expand insurance in the unprofitable rural areas too will suffer.
Hence, disturbing the character of the LIC will harm the interests of the national economy and the
poorer sections of the Indian society.
In the above circumstances we request you to give your Party’s support to our struggle against
dilution of government equity in LIC and impress upon the government to retain LIC as 100%
government owned.
Thanking you,
Yours faithfully,
S. Rajkumar Vivek Singh Shreekant Mishra
General Secretary Secretary General General Secretary President, AIIEA
Federation of LIC NFIFWI
Class I Officers’ Associations