New Delhi: The Union Cabinet has approved amendments to the General Insurance Business (Nationalisation) Act, paving the way for privatisation of government-owned insurers.
The amendments, approved by Cabinet, will remove the clause for the Centre to hold at least 51 per cent in public sector insurance companies at any given time. It 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.
The finance ministry will move amendments to the insurance Act in the ongoing Parliament session. This will open the door to privatisation of a public sector insurer. The Department of Investment and Public Asset Management will lay the groundwork, informed an official.
Since the government has already increased foreign direct investment in the insurance sector to 74 per cent, overseas investors can also pick up stake in a government-owned insurer up to that ceiling, he added.
In Union Budget 2021-22, Finance Minister Nirmala Sitharaman had announced that the government would privatise one general insurance company, along with two public sector banks.
The NITI Aayog is learnt to have recommended United India Insurance Company as one of the potential candidates for privatisation, Business Standard had earlier reported. The policy think tank has suggested that the public sector insurer be considered for privatisation in the banking, insurance, and financial services sector, which has been classified ‘strategic’ in the new public sector enterprises policy for an atmanirbhar Bharat. The consultations within the government also include privatisation of other insurance companies – National Insurance Company and Oriental India Insurance.
The exercise for short-listing the right candidate for privatisation is simultaneously on, and the target is to privatise one insurer in the ongoing fiscal year, as announced in the Budget, the official quoted earlier said.
A public sector insurer will be finalised for privatisation only after amendments are approved by Parliament. The alternative mechanism will see Finance Minister Nirmala Sitharaman and Road Transport and Highways Minister Nitin Gadkari, among others, first approving the candidate for privatisation. The proposal will then be placed before the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi.