The Union cabinet has approved amendment to the General Insurance Business (Nationalisation) Act, 1972 paving way for privatisation of one state-run general insurer. According to various media reports, the nod was given on Wednesday.
The amendments, approved by the cabinet, will remove the clause for the Centre to hold at least 51 per cent in public sector insurance companies at any given time and transfer of management control to private players in case of a shortlisted firm. 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.
Following the cabinet nod, a bill will be moved in Parliament. Although the bill is not part of the indicative schedule of legislation for the monsoon session, it is not clear whether the bill will be introduced during any of the remaining days of the session that is scheduled to end on August 13. Reports suggest that the finance ministry will move amendments to the insurance act in the ongoing Parliament session.
It is also learnt that once the bill is passed it will pave the way for overseas investments in a government-owned insurer up to the ceiling of 74 per cent since the Centre has already increased foreign direct investment in the insurance sector.
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The privatisation move was announced by Finance Minister Nirmala Sitharaman in the Union Budget 2021-22. She had announced that the government would privatise one general insurance company, along with two public sector banks.
India has four general insurance companies in the public sector - National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited. One of these will be privatised for which the government is yet to finalise the name.
According to reports, NITI Aayog which was to recommend a suitable candidate for privatisation have suggested the name of United India Insurance to the Core Group of Secretaries on Disinvestment headed by the Cabinet Secretary.
