Ordinance soon to de-merge GIC

By J. Venkatesan

NEW DELHI, OCT. 14. The Centre will soon promulgate an ordinance to de-merge the General Insurance Corporation (GIC) and its four subsidiaries and to allow them to function as independent entities.

While the GIC will be concentrating on re-insurance business, the four insurance companies, Oriental Insurance, New India Assurance, United India Insurance and National Insurance will continue to do general insurance business.

According to highly placed sources in the government, the ordinance would meet the requirements of emerging globalisation and WTO regime. The Insurance Regulatory and Development Authority (IRDA) has also recommended such a de- merger to ensure better performance of the insurance companies.

It is also intended to meet the high standards prevailing in the US and European countries. For the time being the Life Insurance Corporation will continue to concentrate on life insurance business.

The ordinance will amend the General Insurance Act, 1972 and its equity will be increased from the present Rs. 100 to Rs. 200 crores. The four independent insurance companies will each have an equity base of Rs. 100 crores.

Golden share

Another ordinance being contemplated is the one relating to introduction of golden share in public sector corporations (PSUs) that are being disinvested.

The ordinance is intended to incorporate Sec. 87-A in the Companies Act to provide for a scheme of golden share for the Central government in the PSUs even after the holdings were diluted and this scheme will be in existence for five years. The governments hopes to protect its interest and that of the workers once the holdings were disinvested.

The ordinance will vest powers with the government to intervene and prevent any policy decision of the PSUs that might affect the interests of the government. At the same time even 100 per cent disinvestment could be permitted in some cases if the situation so warranted.

Bank acquisitions

Yet another ordinance contemplated is the one to amend the Banking Acquisitions Regulation Act, 1969 and the two subsequent amending Acts by which 28 private sector banks were nationalised.

Further amendment to the Act is intended to facilitate reduction of government's equity holdings from the present 100 per cent to 33 per cent. This step is a sequel to the Finance Minister's budget announcement to help the banks to raise resources from the market by selling their shares.

The three ordinances and the one to amend the Passports Act will be promulgated after formal approval by the Cabinet.

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Section  : National
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