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Centre plans disinvestment in banking, insurance sectors
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SME Times News Bureau | 21 Jul, 2020
The Centre is planning to expand its disinvestment plans and considering
to bring two key sectors -- banking and insurance -- into the ambit of
its new disinvestment policy, official sources said.
A new
disinvestment or privatisation policy is in the making and people in the
know of things said that a draft cabinet note is being prepared for the
same.
The Prime Minister's Office (PMO), the Finance Ministry
and the Niti Aayog have already discussed the inclusion of insurance
sector for strategic disinvestment and the banking sector is likely to
be discussed upon later.
Among the insurance companies, the Life Insurance Corporation of India will not be part of this disinvestment process.
There are a total of eight state-run insurers, including six general insurance companies and one reinsurance company.
Of late, the government had to infuse capital into the general insurance companies as they were undercapitalised.
Earlier
this month, the Union Cabinet approved capital infusion of Rs 12,450
crore into three state-run insurance companies -- the Oriental Insurance
Company, the National Insurance Company and the United India Insurance
Company.
The approved amount also includes Rs 2,500 crore infused in FY 2019-20.
In
the last Budget on February 1, the government had set aside Rs 6,950
crore for recapitalisation of the three public sector general insurance
companies.
Further, the talks of stake sale in banks,
interestingly, comes just over couple of months after the merger of 10
public sector banks came into effect on April 1.
With the merger coming into effect, India currently has 12 public sector banks, down from 27 in the year 2017.
The
consideration of widening the ambit of the privatisation plan comes as
the government seems confident of a successful stake sale in PSU oil
major BPCL, the bidding date for which ends this month.
Several
global and domestic oil giants have shown interest in buying the 52 per
cent stake in the state-run oil company, according to people in the know
of things.
During the announcement of the ‘Aatmanirbhar Bharat'
economic package in May, Finance Minister Nirmala Sitharaman had said
that the Centre will come up with a new Public Sector Enterprise Policy,
and open up all the sectors to the private sector.
She had said
that under the new policy, a list of strategic sectors requiring the
presence of PSEs in public interest will be notified and in these
sectors, at least one enterprise will remain in the public sector while
the private sector will also be allowed.
The minister had said
that to minimise wasteful administrative costs, the number of
enterprises in the strategic sector will ordinarily be only one to four
and the others will be privatised, merged or brought under holding
companies.
In the Union Budget for FY21, the government had set a
disinvestment target of Rs 2.1 lakh crore. The target has, however,
been described as ambitious by many as the Centre didn't reach anywhere
near its target in the last fiscal.
Further, official sources
said that the ongoing Covid-19 pandemic, besides slowing down the
economy, has also slowed the government's disinvestment plans.
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