New Delhi: With its plans on consolidation in the insurance sector hitting several hurdles, the government has started exploring different options including de-merging three of its big-size general insurance companies into smaller units and then look at strategic sale of few operations to the private sector. The Finance Ministry earlier considered merging three public sector general insurance firms – National Insurance Company, United India Insurance Company and Oriental India Insurance Company barring New India Assurance – to create one large and strong entity. Also Read – Maruti cuts production for 8th straight month in Sep Official sources said that de-merger plan has now been brought to the table after a series of stakeholders meetings and this has now become one of the options before the Finance Ministry to make state-owned entities more focused on the task of increasing insurance penetration in the country. “The idea to merge PSU insurers is fraught with problems as one giant entity would be difficult to administer and manage. Moreover, this might lead to branch rationalization/closure and major job losses in the sector,” said an official source. Also Read – Ensure strict implementation on ban of import of e-cigarettes: revenue to Customs “De-merger of big-size PSUs into smaller units, on the other hand, would enable ease in administration and further increase in reach of these to the masses with improved and more effective focus and management,” the source added. Post de-merger, a fresh assessment could be made about privatising some of the insurance operations by offering them to strategic investors. It is believed that strategic sale of smaller units may be easier to undertake and can get better valuations. Moreover, smaller units would also help to scale up regional branches and improve insurance penetration. The government had announced merger of three public sector general insurance firms in the Budget 2018. The move was billed as the biggest-ever merger in the insurance sector with the new entity having a valuation exceeding Rs 1 lakh crore. It intended to complete the exercise in FY19 itself. But since then, the merger proposal has moved at a snail’s pace and has encountered several hurdles. Earlier this year the merger plan hit a roadblock when the Department of Financial Services (DFS), which oversees the operations of state-owned insurance firms, wrote to DIPAM not to proceed with the merger plan in haste and examine the proposal afresh and untangle complex operational issues first. One of the issues in merger is also poor financial health of two out of three insurance entities that continues to remain in losses. In the quarter ended September last year, the three insurers had posted a combined loss of around Rs 1,800 crore. Moreover, a few of the insurance firms have also lost market share. In fact, PSUs insurers’ market share has fallen from a level of 56 per cent in FY13 to 51 per cent in FY18. As part of strengthening exercise, government has also directed the firms to undertake monetising their assets including real estate to raise revenues. It is expected that capital support to the tune of Rs 4,000 may also come from the Centre for these insurance firms. The general insurance market in the country comprises 27 companies including the four major PSU entities, 23 private players and six are stand alone health insurers. The insurance density in India (ratio of premium to total population) is $73 compared with average world insurance density of $650. Insurance penetration in India is at 3.69 per cent compared with world average of 6.13 per cent. The penetration in general insurance sector is still less than 1 per cent.
New Delhi: Anil Agarwal, the scrap metal dealer turned billionaire metals tycoon, has told Prime Minister Narendra Modi that the Centre should privatise five mining firms including NMDC to save some of the $400 billion that India spends annually on imports, saying the government has no business to be in the business. The Vedanta Resources chairman, who was one of the three industrialists invited for a pre-Budget meeting that Modi had with over 40 economists and sectoral experts Saturday, also said privatisation without job loss can help boost the economy by bringing in efficiency and raising domestic output. Also Read – Maruti cuts production for 8th straight month in SepThe other two corporate honchos invited to the interaction were Tata Group Chairman N Chandrasekaran, who gave recommendations on manufacturing and services sectors, and ITC Chairman Sanjiv Puri, who spoke on value addition in the economy. Agarwal gave suggestions on mining and natural resources. “I was honoured to be part of the interaction organised by Niti Aayog on Saturday and in my humble submission I told the Prime Minister that the government has no business to be in the business. It should divest its stake in at least five PSUs such as Hindustan Zinc, Hindustan Copper, Kolar Gold, Uranium Corporation, Shipping Corporation of India and NMDC,” he said in an interview. Also Read – Ensure strict implementation on ban of import of e-cigarettes: revenue to CustomsPrivatisation without job loss is good, he said. “When we bought majority stake in Hindustan Zinc Ltd, it had 5,000 employees. Today it has 25,000 employees,” he added. Vedanta had acquired 64.9 per cent government stake in Hindustan Zinc Ltd (HZL) during 2002-2003. The government continues to hold 29.5 per cent stake in HZL, which the company wants to buy. Agarwal said India’s import bill of $400 billion will soon be $1 trillion if it does not ramp up production of oil and gas, minerals and metals such as gold. “If we can double the oil production and raise gold output to 300 tonnes, the entire current account deficit (CAD) will be wiped out,” he said. His other suggestions included giving autonomy to public sector companies and banks by bringing down government holding to 50 per cent and making them board-run just like Petronet LNG Ltd, the nation’s biggest natural gas importer. Mining in 200 blocks should be approved immediately and big blocks of coal, bauxite, copper and iron ore should be auctioned, he said, adding there should be no production cap such as ones existing in Goa and Karnataka on iron ore. Increased mining can add $500 billion to the economy and create two crore jobs, he emphasised. Existing oil block contracts should be extended on the same terms and no retrospective tax should be imposed. Also, all forest and environment clearances should come in 60 days and corporate tax should be reduced to 20 per cent from current 30 per cent, Agarwal said. Natural resources and electronics hold massive potential to create jobs, he said, adding India should focus on sustainable exploitation of underground resources. Agarwal, the founder and majority-owner of Vedanta Resources, said the government should make public sector companies and banks independent by making them board-run just like British Airways and GE. “All PSUs and PSBs can perform three times better if autonomy is given to them,” he said. “PSUs have huge potential and immense talent pool. But the executives are afraid to take decisions because of fear of inquiries. They should be empowered to take decisions.” Agarwal, whose journey from scrap metal dealer to metals tycoon started in 1979 when he bought a company, said the government should trust entrepreneurs and support their spirit to boost the economy and create jobs. Characterised by rapid growth and bold deal-making, Agarwal is one of India’s most prominent self-made industrialists with his group having interests in sectors ranging from iron ore and copper to oil and gas, with operations across Australia and Zambia, as well as his home country. In the meeting on Saturday, experts shared their views, in five distinct groups, on the themes of macro-economy and employment, agriculture and water resources, exports, education, and health. The meeting came in the backdrop of India’s economic growth slowing to a five-year low on a dip in industrial and manufacturing output numbers, falling automobiles sales and reduced domestic oil consumption. Agrarian crisis and unemployment are some other challenges that the government is widely expected to confront through policy initiatives in the Budget to be presented on July 5.
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