Insurance may get 'strategic sector' tag under new privatisation policy

The Centre may classify insurance as a ‘strategic sector’ under the new privatisation policy, according to government sources. In other words, there will be a maximum of four state-owned insurance firms in the long run.

Other sectors that could get the ‘strategic’ tag are railways, oil and gas, defence, space and atomic energy. Banking is also likely to be in the club, with the government considering putting up some state-owned banks on the block.

Based on the new privatisation policy announced by Finance Minister (FM) Nirmala Sitharaman as part of the Atmanirbhar Bharat package, the government will come up with a list of strategic sectors.

“Insurance is being considered as a strategic sector,” said a senior government official.

At present, there are eight state-owned insurance firms across life, general, and reinsurance verticals. These are Life Insurance Corporation, General Insurance Corporation, National Insurance, New India Assurance, Oriental Insurance, United India Insurance, Export Credit Guarantee Corporation, and Agriculture Insurance Co.

The Union Cabinet recently scrapped the long-pending proposal to merge the three unlisted general insurers — Oriental, National, and United India — and then take the merged entity public. Instead, these could be among the candidates for privatisation, once a strategic sector policy is approved by the Cabinet.

A draft Cabinet note on the issue is being circulated among various departments, and officials expect the note to be up for consideration by August-end.

“Inter-ministerial consultations on the note are taking time. It is clear that every department wants to hold on to its PSUs, and would want its sector to be designated a strategic sector,” said a second official.

The FM had announced the new privatisation policy on May 17. “In the notified strategic sectors, there will be only one to four public sector enterprises. 

They will be merged/brought together, so there won’t be a mushrooming of the public sector,” she had said, adding that the private sector could come in to the strategic sectors.

“PSEs play an important role in defined areas. We will come out with a coherent policy where the private sector will be allowed, but PSEs will continue to play an important role,” she had said.

The move will lead to ownership changes and rea­lig­nment of businesses, and boost the Centre’s privatisation plans.

Since the announcement of the policy, neither the FM nor anyone else in the government has given any timeframe for the same. 

Officials have also said off the record that once a sector is designated as ‘strategic’ or ‘non-strategic’, there is no fixed timeline for the government to reduce or exit its presence. In ‘non-strategic’ sectors, the government plans to exit completely.