LIC IPO- Gross Injustice To The Smaller LIC Policy Holders




Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

Please refer to my letters dated 6-3-2022  & 11-4-2022 addressed to you on the manner in which the proposed LIC IPO would do gross injustice to its policyholders, largely belonging to the SCs/STs/OBCs ( &

In my correspondence, I had pointed out again and again how the IPO would place millions of small policy holders, especially those belonging to the SCs/STs/OBCs at an undue disadvantage, to benefit a handful of affluent, speculative, profiteering stock market investors.

It is bizarre that your Ministry’s IPO proposal should restrict the investment window for the policy holders, the de facto owners of LIC’s fund, to a mere 10%, and provide the remaining 90% window to those profiteering stock market investors, including a 20% window for foreign investors. There cannot be any graver travesty of justice meted out to the millions of voiceless small policyholders, than this.

In particular, I had brought to your notice some news reports that suggest a few deep-pocket investors clandestinely “renting out” the small policyholders’ accounts and their personal data, infringing every norm of privacy of such information, by throwing crumbs to them, to misappropriate even that 10% restricted window, to lay claim on their legitimate resources and profiteer at their cost. I demanded in my last letter that an independent enquiry by a member of the higher judiciary be ordered and, till such time the facts were ascertained, the Finance Ministry should pause the LIC IPO move. I feel disappointed that you have neither acknowledged the receipt of my letter nor acted on it.

The more recent news reports on the manner in which your Ministry is indiscriminately proceeding in the matter indicate a total surrender on the Finance Ministry’s part of the policyholders’ funds to large foreign investors such as Abu Dhabi Investment Authority, Singapore-based GIC, three Canadian pension funds and Qatar Investment Authority among other sovereign wealth funds (

Most of these sovereign wealth funds, as the name suggests, are controlled by the foreign governments, who are more interested in maximising the short-term returns to those funds than the long-term well being of the vast disadvantaged sections of LIC’s policyholders. It is the latter that have elevated the LIC to its present glorious height by putting in their hard earned savings, which are now being nonchalantly handed over to these newcomers from foreign lands.

Your ministry owes an answer to the nation on the following questions.

  1. Would such deep-pocket foreign funds and foreign investors care for continuing the LIC as a unique social security provider for the marginal households in the country?
  2. Would not opening the doors of the policyholders’ Life Fund to foreign investors imply allowing the latter to syphon off a significant portion of the policyholders’ funds to overseas destinations?
  3. Would not these overseas investors and the affluent domestic investors insist on the LIC gradually moving away from its role of not only a social security provider but also a dominant lender of funds for financing the States’ infrastructure and their social sector schemes?
  4. Does this not imply that, by divesting its own equity share that symbolises its trusteeship relationship with the policyholders and its welfare mandate under the Constitution, the government would be relinquishing its statutory role that was envisaged when the LIC was created by the Parliament more than six decades ago?
  5. Would not divestment of the government equity shares also lead progressively to the stock market investors pressurising the government into diluting the sovereign guarantee provision under Sec 37 of the LIC Act? If it were to be so, would not the LIC be then progressively withdrawing its reach from the rural and the remote areas, and the smaller households, a prospect that was never envisaged when the legislature created the LIC?

At the cost of repetition, hoping that some sensitive nerve of the government somewhere, if it ever existed, would respond at least feebly, I wish to reproduce below the prophetic words of Shri C D Deshmukh, the eminent Finance Minister who had the vision to create the LIC in 1956 (

The concept of trusteeship, which should be the cornerstone of life insurance, seemed entirely lacking (in private insurance companies). Indeed, most management had no appreciation of the clear and vital distinction that exists between trust moneys and those which belong to joint stock companies

the (insurance) business must be conducted with the utmost economy and with the full realisation that the money belongs to the policyholder. The premium must be no higher than Is warranted by strict actuarial considerations. The fund must be invested so as to secure the maximum yield for the policyholders that it may be possible to secure, consistent with the safety of the capital. It must render a prompt and efficient service to its policyholder and by its service make insurance widely popular. Finally, the management must be conducted in a spirit of trusteeship

Insurance is an essential social service which a welfare State must make available to its people and the State must assume responsibility for rendering this service once it is clear beyond reasonable doubt that it cannot be provided in any other manner….  So, while it is the failure of the general run of insurance companies to live up to the high traditions demanded of them that has led the Government to take this step, I would like to emphasise that nationalisation in this field is in itself justifiable. With the profit motive eliminated, and the efficiency of service made the sole criterion under nationalisation, It will be possible to spread the message of insurance as far-and as wide as possible, reaching’ out beyond the more advanced urban areas and into hitherto neglected, namely, rural areas.”

The investments would be made, it is needless to say, primarily in the interest  of the policy-holders to whom the money belongs, but the interests of the community at large which would be vitally affected by the manner in which these vast sums are utilised and invested would be an equally important consideration……Incidentally, it might be noticed from clause 28 that at least 95 per cent of the surplus disclosed is to be allocated to the policy-holders. And 5 percent to the share-holders, that is, the Corporation. This is only the minimum and I am sure later on this proportion could be increased with the result that the State’s share will be correspondingly reduced

The then Prime Minister Nehru and the then Finance Minister Deshmukh, whose foresight and vision had led to the creation of a unique institution of the LIC as a social security provider for the disadvantaged people of the country with such a vast reach, would never have imagined even remotely that their successors six decades later would wantonly dismantle it without batting an eyelid, a truly disappointing commentary on the evolution of statesmanship in the country.

I would once again appeal to the government not to rush into divesting the LIC.

Public good and public welfare lie in what is beneficial for the voiceless majority of the country, not in myopoic policies that allow an advantaged minority to profiteer at the cost of the disadvantaged majority.


Yours sincerely,

E A S Sarma

Former Secretary to Government of India



Support Countercurrents

Countercurrents is answerable only to our readers. Support honest journalism because we have no PLANET B.
Become a Patron at Patreon

Join Our Newsletter


Join our WhatsApp and Telegram Channels

Get CounterCurrents updates on our WhatsApp and Telegram Channels

Related Posts

DIPAM’s failure in handling disinvestments

Had DIPAM conducted due diligence on bidders' background, it would have avoided causing embarrassment to the government in Pawan Hans disinvestment   To Smt Nirmala Sitharaman Union Finance Minister Dear…

Join Our Newsletter

Annual Subscription

Join Countercurrents Annual Fund Raising Campaign and help us

Latest News