Policy Holders, Workers Will Suffer If Modi Govt Continues to Bleed LIC: Congress

Senior Congress leader led a press meet replete with allegations that the government had been hollowing out the life insurance company with little regard for economic implications.

New Delhi: In its campaign against the ongoing economic slowdown, the Congress hit out at the BJP-led Union government for hollowing out the cash-rich public sector unit Life Insurance Corporation of India (LIC) to save ailing banks and PSEs from sinking further. 

The party said that divesting capital from the profit-making LIC to other PSEs may not only have damaging long-term consequences for Indian economy but can also jeopardise the future of crores of Indian people who have  bought policies from the insurance behemoth. 

Numbers shown by Congress on investments by LIC in the risky public sector, in its press statement. Photo: INC

Citing data from the recently-released Handbook of Statistics on  Indian Economy, an annual document published by the Reserve Bank of India, Congress alleged that the LIC invested Rs 10.7 lakh crore in the last five years in the public sector, only marginally less than the Rs 11.94 lakh crore that was cumulatively invested between 1956, the year it was founded, to 2014. 

Not all of this investment however went into supporting PSEs, but was also used to invest in government bonds.

 

Congress’s numbers on LIC’s investments in the uncertain public sector. Photo: INC

However, senior Congress leader Ajay Maken alleged that the spike in the company’s investments, which has accounted for a significant part of its total estimated asset value of Rs 31.11 crore, has happened primarily because of the Union government pressure on the LIC to divert its funds to save ailing public sector units. 

At the same time, the investments of LIC in the private sector also took a hit. During the National Democratic Alliance II government led by prime minister Narendra Modi, the LIC invested only Rs 80,000 crore in the private sector, a dip of nearly 40% when compared to the previous government. 

Also read: By Using LIC to Fill Fiscal Gaps, Modi Govt is Risking Premium Money of Millions of Indians

During the United Progressive Alliance-I and UPA-II governments, the figure was substantially higher, Rs 1.35 lakh crore and Rs 1.28 lakh crore respectively. 

Maken said that putting so much burden on LIC may directly hit its 28.24 crore policy holders, around 1.12 lakh employees and 10.72 lakh active agents. 


The Print reported that the Rs 10.7 lakh crore invested in the ailing public sector is “a 72% jump from the Rs 6.2 lakh crore LIC invested in public sector in the five years of UPA-II when Manmohan Singh was prime minister”, according to RBI data. Almost 99% of these investments were done in stock exchange securities.  

It is noteworthy that successive governments have been increasingly becoming dependent on LIC to bail out cash-strapped PSEs. During the UPA-I, LIC invested Rs 3 lakh crore in the public sector. The UPA-II let go Rs 6 lakh crore. However, the Modi government put the maximum burden on the LIC as the company has invested Rs 10.7 lakh crore in the public sector.  

Comparative data on household liability, as shown by Maken in his statement. Photo: INC

The Hindu Business Line projected that as a result of such pressure on LIC,  it has posted losses amounting to crores. In just one year, 2018-19, LIC lost almost Rs 17,000 crore. 

LIC bailed out the haemorrhaging IDBI last year, infusing Rs 21,000 crores in it and increasing its stake to 51% in the bank. 


“Yet, IDBI posted a loss of Rs 3,800 crores in June, 2019 with almost 29% non-performing assets,” said Maken. 

“Refusing to learn from its experience, the Union cabinet has announced that Rs 9,300 crores are to be infused into the IDBI this month. LIC’s share in this round of capital infusion is almost Rs 4,743 crores.”

“While overall benchmark Sensex grew at 73% (Bombay Stock Exchange), the Public Sector Unit Index in which LIC has invested grew by merely 20%,” he said, adding that small savings of people will have to eventually take a hit if the government continues to bleed the LIC.