L.I.C of India's IPO - Transparency issues.

Excerpt regarding L.I.C of India's I.P.O

Source: https://theprint.in/opinion/lic-to-tax-charter-budget-2020-wants-india-in-the-big-league-but-offers-mere-quick-fixes/ 

LIC to tax charter: Budget 2020 wants India in the big league, but offers mere quick fixes

Modi government's Budget identifies key reform areas, but a mere window dressing won’t get desired results. There is clear need for deep structural reforms.

RENUKA SANE 1 February, 2020 6:34 pm IST

The Narendra Modi government’s 2020 Budget made four important announcements that are seemingly unrelated — increase in deposit insurance to Rs 5 lakh from the earlier Rs 1 lakh; commitment to a tax charter that reduces harassment by tax officials; separation of the Trust for government employees from the Pension Fund Regulatory and Development Authority; and the listing of Life Insurance Corporation of India. What is common to these announcements is that they reflect the growing aspirations of an economy trying to break into the big league. But true reform in each of the sectors will only be possible through a fundamental restructuring of the underlying administration.

The Budget has picked on the right questions. But these are not problems that can be solved by tinkering at the edges.

LIC listing

Finally, the Initial Public Offering of the LIC is perhaps the boldest announcement in this Budget. This will only be possible if investors are able to see what is on LIC's books. For example, the LIC would have to tell us the scrip-wise cost of investments over (at least) the last decade, and the current market value of these investments. A lot of this detail today remains unavailable. A move to the new accounting standards, IndAS, will mean that profit will have to be booked as the difference between fair market value (as opposed to the current book value) and actual sale. The Modi government will need to have the appetite to deal with skeletons that may emerge from the LIC's closet and also be ready to lose the all-weather buyer for its own offer for sale and other transactions. This requires serious appetite for reform.

The Modi government now needs to get to the essence of the frictions in each of the sectors, and follow up with deep structural reform that will truly pave the way for the aspirations of a young India.

The author is an associate professor at the National Institute of Public Finance and Policy (NIPFP). Views are personal.