Budget 2020: Govt to Sell Part of its Stake in LIC, Faces Flak

Finance Minister Nirmala Sitharaman on Saturday, 1 February announced that insurance behemoth Life Insurance Corporation (LIC) will be listed as part of the government disinvestment initiative.

She further said that the listing brings in more financial discipline among the entities.

The government proposes to sell a part of its holding in LIC through initial public offer, she said while unveiling Budget 2020-21.Currently, the government owns the entire 100 percent stake in Life Insurance Corporation of India (LIC).

The decision was met with widespread criticism, with several people pointing out that LIC is the lifeline of the middle class as well as one of the few profit-making Public Sector Undertakings.

For the first time since independence govt selling shares of LIC, one organisation in which people have immense faith. This came as a routine one line announcement in the budget. No explanation as to why this is being done. Who will buy these shares & implications of dilution?

— M K Venu (@mkvenu1) February 1, 2020

Pls save LIC. Thts only lifeline of middle class.

— ASHUTOSH MISHRA (@JournoAshutosh) February 1, 2020

LIC to have an IPO.
The shiniest of the Crown Jewels will finally be sold.#Budget2020

— Sachin Tandon (@cugwmui) February 1, 2020

The share price of the LIC Housing Finance Limited also tumbled from Rs 446.55 at 11 pm when Finance Minister Nirmala Sitharaman began her Budget Speech to 413.75 at 3 PM.

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Opposition parties were particularly critical of this decision, calling it a proof of the government’s failure in generating new investment.

Contrary to the "Aspirational India" theme presented by FM @nsitharaman the #Budget2020 is deeply depressing. No money for expenditure, so only way is to sell more family silver like selling of profitable LIC. Fiscal deficit numbers are hard to believe.

— Prithviraj Chavan (@prithvrj) February 1, 2020

PM Modi has wasted his 2019 mandate. No real solution for highest unemployment in last 4 decades. The budget was neither aspirational or new. Govt inability to generate revenue is not an excuse for selling stake stake in LIC. Advisors behind longest speech should be sacked.

— Gaurav Gogoi (@GauravGogoiAsm) February 1, 2020

If #LIC goes public following an IPO, that means it’s investment portfolio is seriously depleted in value.

Will the FM disclose its portfolio valuation?

This is not privatisation, it’s panic. #Budget2020

— Sanjay Jha (@JhaSanjay) February 1, 2020

Another line of criticism was in the context of the several kinds of tax exemptions that were removed, which could end up disincentivising investing in LIC.

Tax cut ki goli mat do

Read the fine print on the so-called IT cuts.
Govt removes incentives to ‘save’ in a nation where there is no social security.
70/100 tax exemptions withdrawn.
Exemptions were given as incentive to save money in PPF, LIC, Health insurance etc #Budget2020

— Citizen Derek | নাগরিক ডেরেক (@derekobrienmp) February 1, 2020

However, some also pointed out the positive aspects of this decision that it was “financially important for deepening the market”.

We plan to sell part of its holding in LIC through an IPO: @nsitharaman in #Budget2020

Big decision:
-- politically volatile
-- financially important for deepening market
-- LIC will enter the Sensex
-- governance will push LIC towards better disclosures

— Gautam Chikermane (@gchikermane) February 1, 2020