The government has come up with a number of measures in respect of the insurance sector. No doubt, given the political constraints, North Block cannot venture into difficult areas of reform, specifically opening up the sector to private companies, both foreign and domestic, and one can say that the government will never muster the courage to cross the bridge. But then, even without throwing open the insurance business to private players, the Union finance ministry could have extended what is described as the autonomy package to include a break-up of the monolithic LIC -- no doubt taking care to keep the operational benefits that go with size especially in this age of mergers and acquisitions -- and functional independence to the subsidiaries of GIC.

The LIC is far too massive and if the idea is to make the corporation globally competitive it should be split it into two or three large autonomous entities. Since the broad parameters have been set, there is no risk of these entities doing anything that goes against the government's goals. In regard to GIC, there is no reason why it should continue to act on behalf of the subsidiaries for disbursement of consortium loans, debentures and bonds for projects, modernisation and expansion as well as working capital under the so-called autonomy plan. It is not enough to restrict the `autonomy' of subsidiaries to opening new branch offices -- subject to meeting the statutory requirements on management expenses -- and appointment of experts as well as deciding the portfolios of general managers.

If everything is added up, the impression one gets is that the government's stranglehold will be there, which is not saying much for the liberalisation efforts. The government will always have its priorities but to lay down that the same should also be those of LIC and GIC means that insurance will always be a departmental activity. The RN Malhotra Committee, for its part, had not responded enthusiastically to the winds of change and its report had a bureaucratic flavour. This one gets also from the measures that North Block has finalised, despite such a move as to do away with the mandated pattern of investment in respect of LIC. The insurance companies can remain in the public sector and still become competitive. The fact that a political consensus on comprehensive liberalisation is hard to forge can be no justification for the government's retention of administrative control of the insurance business.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.