The White Knight

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Aayush Sharma, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur


The clear pattern emerging from the recent National Thermal Power Corporation (NTPC) stake sale is worrisome. Is Life Corporation of India (LIC) becoming the savior of almost all stake sales done by Government of India (GoI) with an eye on meeting the disinvestment targets?

The point is not that almost 37% of disinvestment fund raising done by GoI since 2011 is through LIC or that 95.5% and 100% of issue size in case of ONGC (2012-13) and BHEL (2014-15) respectively were subscribed by LIC alone1. The problems and their repercussions can be deeper than what meets the eye.

Firstly, such high investments being done by LIC are nothing but moving money from one pocket of the government to another. By doing this, is the government not undermining the very concept of disinvestment just for containing the fiscal deficit in the short run?

Secondly, the problem also seems to be more structural and hence more dangerous. The fundamental question arises that are our disinvestment policies not attractive enough for the private sector?

Thirdly, if the LIC is so ardent on buying such huge stakes in Public Sector Undertakings (PSU), why not strike a deal for an official stake sale from the PSUs to LIC directly and skip the market drama?

These fundamental questions are worth sparing a moment as ‘LIC propping up demand’ has been happening since a long time, be it this government or the last. Also, LIC uses the hard-earned funds raised from the public, hence demanding an even greater accountability.


  1. Detailed LIC stakes in recent disinvestment (Business Standard – Jan 31, 2015)


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