Govt to come out with revised FDI policy to facilitate LIC IPO

The government will come out with a revised foreign direct investment (FDI) policy to facilitate disinvestment of the country’s largest insurer, Life Insurance Corporation (LIC).

A top government official confirmed to news agency PTI that the commerce and industry ministry is making changes to FDI policy for LIC disinvestment after taking views from the finance ministry.

WHY IS THE FDI REVISION NECESSARY?

Anurag Jain, a secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), said the current policy related to the sector will not facilitate the disinvestment process of LIC, and that’s why it needs a revision.

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"We are working on further simplification of the FDI policy. A very important point for further simplification is required urgently as we have to do the LIC disinvestment. So, we would be coming out with a revised FDI policy which will facilitate LIC disinvestment," Jain said.

The matter is being discussed with the Department of Finance Services and the Department of Investment and Public Asset Management (DIPAM).

"We have had two rounds of discussions at my level and now, we have (DPIIT, DFS and DIPAM) come on the same page. So, we are in the process of drafting those changes in the FDI policy. We will go to the Cabinet (for approval),” said Anurag Jain.

As per the current FDI policy, 74 per cent foreign investment is permitted under the automatic route in the insurance sector. However, these rules do not apply to the LIC, which is administered through a separate LIC Act.

Rules outlined by the Securities and Exchange Board of India (Sebi) state that both FPI and FDI are permitted under public offer. However, sources told PTI that since the LIC Act has no provision for foreign investments, there is a need to align the proposed LIC initial public offering (IPO) with Sebi norms regarding foreign investor participation.

SIMPLIFIED FDI RULES FOR LIC DISINVESTMENT

Anurag Jain said whatever FDI percentage DIPAM and the Department of Financial Services would recommend will be allowed in LIC.

"We are looking at the draft to facilitate basically to ensure that this becomes a permissible activity because right now there are certain things which need to be changed," he said.

The Cabinet Committee for Economic Affairs approved the IPO of LIC last year in July and the stake sale is being planned in the ongoing March quarter. The preparation for launching the mammoth LIC IPO is going on in full swing at the moment, with several departments working to make the public issue successful.