Lok Sabha passed Bill to privatise state-owned general insurance companies: All you need to know
On 2 August 2021, the Lok Sabha passed The General Insurance Business (Nationalisation) Amendment Bill, 2021 that allows the government to bring down its stake in the state-owned general insurance companies and privatise them.
The Bill which was passed without any discussion in the Lok Sabha drew strong criticism from the Opposition. West Bengal FM Amit Mitra wrote a letter to Finance Minister Nirmala Sitharaman, urging her not to privatise public sector insurance companies.
Congress leader Adhir Ranjan Chowdhury stated that the Bill is meant to sell public assets to select business houses while describing the amendment Bill as anti-people and anti-national.
FM Sitharaman accused the Opposition of spreading falsehood and asserted that she would respond only if the Opposition agrees to debate the provisions of the Bill.
It is worth mentioning that the Bill was passed through a voice vote and the House was adjourned soon after it by BJP's Rama Devi who was in Chair.
Need for the Amendment
The Bill which was tabled in Lok Sabha on 30 July 2021 seeks to usher in more private capital to help improve the reach of the general insurance business and make more of its products available to the customers. It is part of the government's strategy to open up to more sectors to private participation and improve efficiency.
The key feature of the Bill is to remove the existing law of 1972 that capped the central government’s share to not less than 51% of the equity capital of a specified insurer. It also provides for cessation of application of the existing law to those insurers in which the government ceases to have control. Post amendment, the foreign investors will be able to hold up to 74% in the divested general insurance firm subject to Indian management and control, as per the government sources.
Control here refers to the right that the centre enjoys appointing the majority of directors or power to influence management or policy decisions.
Objectives of the Bill
While explaining the objectives of the Bill, Finance minister Nirmala Sitharaman stated that the amendments to the existing general insurance law of 1972 was necessary to enhance insurance penetration, social protection and to better the interests of policyholders, thereby contributing to faster growth of the Indian economy.
The amendments also provide for the liability of a director of a specified insurer, who is not a whole-time director, in the case of certain acts by the insurance firm that he was aware of or party to.
2021-22 Budget Speech
In her Budget speech for FY 2021-22, FM Nirmala Sitharaman announced a big-ticket privatisation agenda including two public sector banks and one general insurance company. She further hinted at the legislative amendments to put this ambitious announcement in place.
"We propose to take up the privatisation of two Public Sector Banks and one general insurance company in the year 2021-22. This would require legislative amendments," said FM Sitharaman during her 2021-22 Budget speech.
General Insurance Companies In India
India has four general insurance companies in the public sector. These are mentioned below.
1- National Insurance Company Ltd.
2- New India Assurance Company Ltd.
3- Oriental Insurance Company Ltd.
4- United India Insurance Company Ltd.
Post government's announcement, one of these will be privatised. The government is yet to finalise the name. The government has set an Rs. 1.75 trillion disinvestment target for this fiscal year.
The General Insurance Business (Nationalisation) Act, 1972
1- The General Insurance Business (Nationalisation) Amendment Bill, 2021 seeks to amend the General Insurance Business (Nationalisation) Act of 1972.
2- The 1972 Act was enacted to nationalise all the private general insurance business companies in India.
3- The 1972 Act set up the General Insurance Corporation of India (GIC).
4- The Act was amended in 2002 to transfer the control of the four general insurance companies in India to the Centre, thereby making them independent companies.