Friends, The pity is that government is not even sure of what it is doing. Fearing a poor response from the market and private business to disinvestment in
Message 1 of 1
, Nov 22, 2012
The pity is that government is not even sure of what it
is doing. Fearing a poor response from the market and private business to
disinvestment in HCL; thefinance ministry led by PC has
come with Plan-B to back up the effort of Ministry of Mining, which is the administrative
ministry for HCL. Financial Services secretary, D K Mittal in parallel
notification was being issued to allowLIC to
hold up to 30 per cent in listed/unlisted companies against the current cap of
10 per cent^^.The
catch is that LIC orLife Insurance
Corporationis a government owned insurer. The idea
is that LIC would be made to bid for HCL shares during divestment process.
Interestingly, this requires amendment to Insurance Act of 1938 [another legacy
of British]. The secretary said that^^The relevant notification is being issued under Section 43(2)
of the Insurance Act of 1938^^to unshackle the hitherto 10%
restriction. Who says that government doesn't move, or moves slowly? So what the
government has planned in case of a poor private investor response to HCL
auction is to have LIC pick up the shares of HCL and cough up the money into
government coffers. Isn't it an interesting little trick that may eventually
play with the savings and future prospects of millions of Indians?
Regulatorwas not happy with the
development:^^The insurance regulator has strongly opposed the ministry’s
idea, saying it would not be prudent and pointing out that large exposures to
individual companies could pose risks to LIC. The Insurance Regulatory and
Development Authority (Irda) has also been concerned over any likely negative
impact on LIC’s financials from its heavy annuity
payouts^^.Market Experts on the other hand
have lauded governmentmove because they are happy that LIC
would have more fire power to moderate risks that private capital, Indian and
foreing, takes: LIC would be able to and
expected to play a more expansive counter-intuitive role of so called
stock market stabilization when Casino Capital of Foreign Institutional
Investors [FII] desserts at a whip of danger.
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