New Delhi:
The Union cabinet, on Wednesday,has approved amendment to the General Insurance Business (Nationalisation) Act, 1972 paving way for privatisation of one of te four state-run general insurers.
The amendments, approved by the cabinet, will remove the clause for the Centre to hold at least 51 per cent in public sector insurance companies at any given time and transfer of management control to a private player who wants buy the compoany. '
India has four general insurance companies in the public sector – National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited. One of these will be privatised for which the government is yet to finalise the name.
However,source suggested that the NITI Aayog had recommend the name of United India Insurance to the Core Group of Secretaries on Disinvestment headed by the Cabinet Secretary.
The amendment will also have an enabling provision for the transfer of management control from the government to the potential buyer of the public sector insurance company.
Though, it is not clear whether the bill will be introduced during any of the remaining days of the session that is scheduled to end on August 13, reports suggest that the finance ministry may move amendments to the insurance act in the ongoing Parliament session.
Once the bill is passed it will pave the way for overseas investments in a government-owned insurer up to the ceiling of 74 per cent since the Centre has already increased foreign direct investment in the insurance sector, said industry sources.
Finance Minister Nirmala Sitharaman in her Budget 2021-22 had announced a big-ticket privatisation agenda, including privatisation of two public sector banks and one general insurance company.
As part of the divestment strategy for the financial sector, the government has decided to go for a mega initial public offering (IPO) of Life Insurance Corporation of India (LIC) and residual stake sale in IDBI Bank during this financial year.
The government has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions during 2021-22. The Niti Aayog was entrusted with the task of recommending names for the privatisation of two public sector banks and one general insurance company. The government think-tank is believed to have suggested the name of United India Insurance to the Core Group of Secretaries on Disinvestment, headed by the Cabinet Secretary.
Aside from this, the government is gearing up to table amendments to the Banking Regulation Act, 1949, to enable privatisation of two public sector banks. Amendments would be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, for privatisation, the sources said.
These Acts led to nationalisation of banks in two phases, and provisions of these laws have to be changed for privatisation of lenders, they said. Last year, the Union Cabinet headed by Prime Minister Narendra Modi had cleared a proposal to provide capital support to National Insurance, Oriental Insurance and United India Insurance. The Cabinet had also decided to increase the authorised share capital of National Insurance Company Ltd (NICL) to Rs 7,500 crore and that of United India Insurance Co Ltd (UIICL) and Oriental Insurance Co Ltd (OICL) to Rs 5,000 crore each to give effect to the capital infusion decision. At the same time, the Cabinet junked the earlier Budget proposal of merging NICL, OICL and UIICL.
The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business.