Probe LIC purchase of ONGC stake, House panel tells IRDA

Parliament's standing committee on finance has asked the Insurance Regulatory & Development Authority (IRDA) to inquire into any possible breach of investment norms in state-owned Life Insurance Corp's purchase of shares of Oil & Natural Gas Corp (ONGC) in an FPO.

LIC, the country's largest insurer, was reported to have purchased a major part of the sale of a 5 per cent government stake in the state-run oil and gas explorer.

The committee, headed by Bhartiya Janata Party leader and former finance minister Yashwant Sinha, also regretted that the government was using public sector undertakings as ''milch cows'' to bridge its deficit.

''The committee recommends that the IRDA should enquire into this issue and investigate as to whether LIC has violated any prudent investment norms and exceeded the limit stipulated by them,'' it said in a report tabled in Parliament today.

On 1 March, the government raised Rs12,767 crore through auctioning of shares in ONGC. The chaotic issue was on the verge of collapsing till LIC stepped in at the last minute and subscribed to a huge chunk of the issue; as much as 4.41 per cent of the 5 per cent on offer. Some 1.7 per cent of the sale remained unsubscribed.

Following this, LIC's stake in ONGC has gone up to 9.48 per cent. As per the IRDA norms, insurers cannot hold more than 10 per cent stake in any company.

''Owing to risk factors associated with the recent acquisition of shares of ONGC by Life Insurance Corporation (LIC), 29 crore policyholders of LIC are likely to be adversely affected,'' said the committee.