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.

My R.T.I crusade completes 9 years today.

 To commemorate the completion of nine long years of my R.T.I crusade and ten years of relentless struggle with L.I.C of India, my unjust ex-employer that repudiated my hard-earned wage revision arrears' dues; I am posting my first blog on this forum again. 

Do peruse it fully and post your comments here. Thanks in anticipation. Priya

                                                         Shocking but true!

             
                L.I.C of India betrays its resigning employees’ Good Faith!

It repudiates Arrears’ payment and Difference in Retirement dues to its resigning employees.

   
      The Life Insurance Corporation of India, the number one life insurer in the whole world, has not paid arrears of wage payments and arrears of difference payable under Statutory retirement benefits like Provident Fund and Gratuity, due to its resigning employees; since the 1^st of August 1997, as revealed by answers to my RTI application. Revision of the wage bill in the Corporation is done after a period of every five years, but the notification is invariably delayed and the arrears are always paid after a gap of three years after they are actually due.

      The Board of Directors of LIC of India has taken the decision to repudiate the arrears and sent it to the Finance Ministry for approval, though it is a purely administrative decision and not a policy decision. Only policy decisions involving public interest need to be referred to the Finance Ministry. The decision of the Finance Ministry also needs to be analyzed as to why it approved the Corporation’s decisions without due consideration of their legality and Court Judgments on the issue.

     The Corporation has adopted a strategy of depriving its voluntarily resigning employees, that is those who are retiring before twenty years of service, of their legitimate dues by simply resorting to announcement of the notification after inclusion of a clause in a Gazette notified by the Finance Ministry of India, that such employees will not be eligible for payment of arrears. This effectively means that even if a resigning employee has been in service, that is, on roll of the Corporation on the date from which the arrears were effective, he/she will not be eligible to get arrears’ payment. This is illegal as wages are rights of an employee, according to our Indian Constitution and Labor Laws.

     For instance, I had resigned after 18.5 years of service on 2^nd July 2010 and the notification for payment of arrears due from 1^st August 2007 was announced on 11th October, 2010. Legally, I was entitled to the arrears of difference in my wages from 1^st August 2007 to 2^nd July 2010 but it was denied on the basis of this Gazette and subsequent Circular’s notification by the Corporation.

      Similarly, the Provident Fund and Gratuity being Statutory retirement benefits, their difference will also have to be paid as per the revised, enhanced wages. All the allowances, perks, etc. would also have to be calculated accordingly and the difference would have to be paid to that resigning employee.

     The Corporation wrongly differentiates between the two classes of voluntarily resigning employees as those who have completed 20 years of service and those who have resigned before completing 20 years of service. The first class is entitled to the Wage Revision Arrears’ Payments and the second class isn’t entitled to it! Since the wage revisions were announced for all the employees of the Corporation, as a class, the Corporation should not deny the benefits to the resigning employees.

     Besides, the Minutes of the Corporation’s Board Meeting with points regarding recommendations made to the Finance Ministry, for repudiation of arrears and retirement benefits; have not been given to me as they are not available with the Corporation! There is also no rationale on record; of this decision by the Corporation, as revealed by the replies received from the Corporation, in response to the RTI Application made by me; to L.I.C of India.

     The Corporation has also replied that the Central Government takes this decision to repudiate arrears’ payments and hence it has repudiated arrears’ and other allied retirement benefits. In fact, it is the Managing Board of Directors of LIC of India, which takes this decision.

     LIC of India has 115 Divisional Offices, 8 Zonal Offices, 9 Audit Centres, MDC and Central Office, as per the RTI replies. The total number of resigning employees whose arrears have been repudiated, since 1997 will be in thousands, and the total repudiated amount since 1997 will surely amount to crores of rupees.

     The Corporation has refused to answer my RTI queries for details regarding the names, addresses, phone numbers and number of employees who have been denied the arrears payments and difference in retirement and other benefits due to them, as also the actual amount repudiated. The Central Office has given a list of 40 resigning employees, for 2010; and given an affidavit dated 4^th April, 2014, that no other information apart from that given to me in response to my RTI queries, is on its records.

      Interestingly, it refuses to part with this vital information on the grounds that it does not have this information in a centralized form in its Central Office. This is not true as all the information is sent by all the subsidiary offices of the Corporation to its Central Corporate Office in Mumbai regularly on a monthly basis. The Corporation’s Central Office compiles, consolidates and prepares the Final Trial Balance, Balance sheet and other Accounting Statements on a monthly, quarterly and yearly basis and annually presents the same in the Parliament as it is a Public Sector Organization.

      The Central Office server in its I.T. Department has the entire record of all the employees, (in the form of ‘Employee Masters’) of the Corporation and the details of all the resigning employees of the Corporation are updated as and when they retire from service.

      The Corporation has a highly organized and computerized set-up and all its records are computerized, hence it is hard to believe that it cannot reply to those queries in my RTI Application which pertain to information about such employees who have been short-changed by it; and the mind-boggling amounts involved.

      The amounts repudiated haven’t even been accounted for, by the LIC of India in its books of accounts. Had these arrears payments been made, the Income-tax against these payments would have been sent to the Income-Tax Department. Thus this action of LIC of India has even led to a revenue loss to the Central Government exchequer. The Balance Sheet of LIC of India, a reputed Public Sector organization, will also not reflect the correct picture of its financial status.

      Interestingly, the Gazette notifications G.S.R. 824 (E), 825 (E), 826 (E), 2470 (E), issued by the Ministry of Finance, dated 8^th October, 2010; contain a point in their Explanatory Memorandum stating: “It is certified that no employee of the Life Insurance Corporation of India is likely to be affected adversely by the notification being given retrospective effect.”

      Besides, the Supreme Court has already passed a judgment asking the Corporation to pay such arrears to retired employees, in its 2008 judgment. Thus, wasn’t the Corporation guilty of Contempt of Court, if it still persisted in referring to the Finance Ministry for approval, subsequent Gazette notification with the same clause 3 1) b) regarding repudiation of arrears (send proviso of Para 3 of the Notification dated 21^st December 2005 is struck sown being ultra vires to the extent it deprives the petitioner and other similarly situated persons to get the benefit of revised pay scale with effect from 1^st August 2002 after applying the principle of severability. Supreme Court's decision- Petitioner VS GIC) and then issuing an official Circular dated 11^th October, 2010?

      The evasive and lackadaisical response of the Corporation shows that it lacks transparency in its dealings, its records are not maintained properly; it does not follow standard accounting procedures and fair HR practices.

      The Corporation is a trustee of trillions of public money. To its credit, it has been regularly making claim payments to the beneficiaries of its insurance policies, and has the lowest ratio of claims repudiated, in the whole world. Why can’t it play fair with its resigning employees and pay them their dues, gracefully? Is it too much to ask for?

      Hence I request all those employees who have resigned from the Public Sector Insurance companies (LIC, GICs and LICHFL) and not been paid arrears and other retirement benefits and allied dues, to come forward, send their names, phone numbers, e-mail ids, addresses and employment particulars (in these companies), etc. to me; so that we can collectively fight for justice.  You may post your comments and details online on this blog.
      I have also started a new thread of discussion- 'LIC of India repudiates wage arrears' payment'; on the website www.lawyersclubindia.com/Labour and Service law/Service. You may also post your feedback there.

                                                                                   Mrs. Priya Ramesh Swaminathan

                                                                          
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The copyright of this write-up is with Mrs. Priya Ramesh Swaminathan.

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Estimate of the repudiated arrears' payments owed by L.I.C of India to its resigning ex-employees.

         

          Since L.I.C of India refused to provide me with any statistics regarding the wage revision arrears' amounts repudiated, since 1997, I have drawn up an estimate (rather conservatively, since the amounts payable to each person would actually vary with his/her actual length of service, cadre and rank and types of emoluments in the Corporation.) 

          The Corporation gave me a list of 40 employees from the Central Office, 6 employees from the Western Zonal Office (excluding my name, so this number is questionable!) whose arrears have been repudiated, with respect to the 2010 Charter of Wage Revision.

          In its response to one of my questions in my R.T.I appeal, the Corporation stated that it has 115 Divisional Offices, 8 Zonal Offices, 9 Audit Centers, 1 Management Development Center and the Central Office. 

           So in all there are 19 main offices (8+9+1+1) to be considered who could have provided the data asked for by me. All the data flows to the Central Office of the Corporation regularly (Branch office to Divisional office to Zonal office to Central office), since it is the basis of the Balance Sheet prepared by the Corporation. Yet the Central Office didn't provide me the statistics.

            Now let us come to the estimate:

            Assuming 50 Class 1 officers per main office resigned and were denied arrears, with respect to the 2010 Charter, 50 x 19 = 950 Class 1 officers' wage revision arrears had been repudiated.

           Assuming that an equal number of employees resigned w.r.t each of the previous wage revisions in 1997, 2002, 2005, 2010 and 2016, the total number of Class 1 officers whose wages have been repudiated would work out to 950 x 5 = 4750.

          This Clause 3 i b was applicable (though illegally, as has now been established; thanks to the Supreme Court’s judgment!) even to Class 2 Officers - the Development Officers, Class 3 and Class 4 employees of the Corporation..

          Let’s assume that an equal number of them resigned in Class 2 and Class 3 cadres, so 4750 + 4750 = 9500 more employees’ arrears were also repudiated w.r.t those 5 Charters of Wage Revision.

          The total number of resigning Class 1, 2 and 3 employees whose arrears were repudiated will be 4750 + 9500 = 14250

          Assuming that each person would have got a minimum of Rs. 400,000 as arrears (incuding difference in wages, Provident Fund and Gratuity);

         14250 x 400000 = Rs. 5,700,000,000/- would be payable to them, as on date.

          This mind-boggling amount (which would work out to much more actually) will now have to be paid with compound interest at rates applicable on the actual dates that they were payable from, till date. That would work out to billions of rupees.

          (If interest would be paid at 9% p.a. compounded yearly for 14 years, from 2007 till 2021, the total amount payable to 14250 resigning employees would work out to Rs. 19,047,844,055/-)

          The Income Tax as applicable would have to be deducted from these payments and sent to the I.T. department.

Now comes the most offending part!

L.I.C of India has not included these amounts (payable dues - liabilities) in its Statements of Accounts!

By its own admission, in response to my queries posed in the R.T.I Appeal, the Corporation has blithely stated that this information is not available with it as it is not a record and doesn’t need to be maintained by it for its regular functioning!

An Accounts Officer in the Corporation coolly informed me that since the arrears are not payable, they have not been accounted for!

The Supreme Court has mentioned in its judgment that wages are fundamental rights that can neither be waived off nor bartered away, and are in fact payable as the concerned employee was on the pay roll of the Corporation on the date from which the Charter payments were applicable. The fact that the payments were being made retrospectively was immaterial as the Corporation was responsible for the delayed payment.

Another shocking aspect:

This repudiation has been equally applicable for all the 4 nationalized insurance companies, LIC Housing Finance Limited, LIC Mutual Fund Limited and all associated companies, since 1^st August 1997.

Now estimate the mind-boggling amounts involved in this scam! My head is reeling!

If this public sector behemoth L.I.C of India doesn’t maintain its records scrupulously, is given to unethical practices like repudiation of fundamental rights like wages, in respect of its resigning ex-employees; encourages unnecessary litigation (increasing operational costs), evades payment of I.T. dues to the central exchequer and is not transparent in its functioning, what hope can its stake-holders have, for conduct of good business through accurate and statutory business practices? Of clear-cut profits?

If the wage revision arrears would have been paid in a timely manner, the need for their payment with interest today would have been avoided. If they had been accounted for, the massive efforts and time needed to compute all this data now, for payments; wouldn’t have been required. If it had remitted the requisite amounts to the I.T. departments then, it would have prevented the great losses to the central exchequer!

Being a trustee of the policy-holders’ money, L.I.C of India needs to have a professional approach with regard to management of its funds and regular functioning of its business. Above all, respect for its employees, who contribute to its profitability and glory!

LIC IPO - Reporting Actuary - Milliman Advisors

 Source: https://www.thehindubusinessline.com/markets/stock-markets/lic-ipo-govt-appoints-milliman-advisors-to-find-embedded-value-of-the-insurer/article33463908.ece

LIC IPO: Govt appoints Milliman Advisors to determine 'embedded value' of the insurer

Our Bureau  New Delhi | Updated on December 31, 2020  Published on December 31, 2020

An Indian Embedded Value is a measure of the consolidated value of shareholders’ interest in the life insurance business.

The Government on Thursday took one more step towards Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC) by appointing Reporting Actuary.

“Government has selected Milliman Advisors LLP India as the Reporting Actuary for the Embedded Value of LIC,” Secretary of Department of Investment and Public Asset Management (DIPAM), Tuhin K Pandey said in a tweet. Further, he mentioned that work to start soon. Apart from Milliman, EY Actuarial Services LLP and Willis Towers Watson Actuarial Advisory LLP were in the fray.

According to the Indian subsidiary of US-headquartered Milliman, the firm claims to be among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance, financial services, and employee benefits. Founded in 1947, it is an independent firm with offices in major cities around the globe.

DIPAM is a department under the Finance Ministry and is responsible for disinvestments and working together with the Financial Services Department for selling part of Government’s share in LIC.

Indian Embedded Value

Earlier, DIPAM floated a Request for Proposal (RFP) to appoint an actuary for determining the Indian Embedded Value (IEV) for LIC. The IEV is a measure of the consolidated value of shareholders’ interest in the life insurance business within the meaning of the Insurance Act, 1938, and applicable IRDAI regulations. It is one of the pre-conditions of the initial public offer (IPO) for LIC, and it needs to be determined by an independent actuary.

IRDAI regulations require an applicant company to file the ‘Embedded Value’ before an IPO. The valuation report needs to be prepared by an independent actuary and peer-reviewed by another professional.

In her FY 2020-21 Budget speech, Finance Minister Nirmala Sitharaman proposed to sell a part of its holding in LICI by way of Initial Public Offer (IPO). This IPO is critical to meet the ₹2.10 lakh crore proceed. Out of this target ₹90,000 crore is to be collected through selling stakes in LIC and IDBI Bank while ₹1.10 lakh crore is to be mobilised through stake sales, buyback etc. of Central Public Sector Enterprises (CPSEs).

Published on December 31, 2020

Open Request to Milliman Advisors - Govt. Appointed Reporting Actuary

    To, 

         The Reporting Actuary,  

          Milliman Advisors. 

     We, the resigning ex-employees of L.I.C of India request you to ensure that all of us whose arrears and others dues arising due to wage revision since 1997, have been not paid by L.I.C of India; should be paid at the earliest with the requisite interest from the payable date till date of actual payment; to clean up the Balance Sheet of the Corporation. These payments have been illegally repudiated by the Corporation. A Supreme Court ruling has ruled in favor of the employees and declared the clause by which the payments were repudiated, to be ultra vires.

     As these payments (liabilities) amounting to crores of rupees have not been paid since 24 long years, the profits of the Corporation have been inflated ever since 1997!

    Hoping for a prompt resolution to our long-standing suffering and injustice against us!

    Thanks in anticipation.

    Yours sincerely,

     Resigning ex-employees of L.I.C of India.

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L.I.C of India is at it again! We wish for change in this New Year 2021!

 Dear friends, 

                       Wish you all a Very Happy New Year 2021! Here's wishing that all of us long-suffering, resigning ex-employees of L.I.C. of India get our arrears and other dues arising due to wage revision, this year!

                       Meanwhile, L.I.C of India, our incorrigible ex-employer merrily adopts the same 'rhetoric' method of communication with all and sundry! The latest sample being today's front page ad in the esteemed Times of India. It reads as follows:

                       "Sabse Pehle Life Insurance

                       Hope 2021 brings you the security of health, family and the future."

                       The logo of the Corporation with the tagline "Har pal Aapke Saath."

                       My take: Really? Sincerely? What about our security? L.I.C of India is illegally squatting on our dues since 24 long years! Since August 1997 to be precise! Doesn't it care for our health, families and security? 

                      It has ditched 'our saath' ever since we left its hallowed portals. But rest assured dear friends, we will fight till our last breath for our fundamental rights!

                     Till then, if the Corporation wants to provide us with some free entertainment (read nauseating platitudes and rhetoric!) who are we to complain?

                     The only thing that we would like to caution the other stakeholders and prospective stakeholders of the Corporation is BEWARE! 

                     "DON'T EVER FALL FOR L.I.C OF INDIA'S RHETORIC! TAKE IT WITH A LARGE PINCH OF SALT!"

                      If you do fall for it, you'll only have yourself to blame! After all, L.I.C of India can never do any wrong, can it? It has the backing of all the powers that be! Ha ha!

      

Human Rights Day - Let's press for our fundamental right to our arrears' payment!

           History has a way of making its presence felt! Whoever has ignored History (read the past blunders of humanity) has had to bite dust! 

          Those who don't learn their lessons from mistakes committed in the past, continue to make the same mistakes, ad nauseum; and invite the wrath of Mother Nature! The ultimate leveler!

          L.I.C of India's insistence on including the vexed and unconstitutional Clause 3 1 B or ii) in the Wage revision Charter, twice after the Supreme Court's judgment declaring it to be ultra vires, is a case in point.

          The Corporation, a huge public sector undertaking doesn't bat an eyelid while trampling upon the human rights of its resigning ex-employees who had worked for long years sincerely and contributed towards its success and glory.

          In response to my Second RTI Appeal, it admitted that its decision to repudiate the arrears was arbitrary. "There is  no reason on record to repudiate arrears". To say that I was stunned would be an understatement!

          How dare a premier organization of L.I.C of India's stature, arbitrarily take such a huge decision that unjustly and illegally deprives its ex-employees of their legally rightful dues?

          Please note the salient points from the Supreme Court's judgment in 2007 as follows:

          The petitioner has a constitutional right to get his pay including the revision in the pay scale and it is settled by law that the fundamental rights can neither be waived off nor bartered away.

          It has come in the supplementary affidavit filed on behalf of respondent No. 2 that the wage revision of the employees of the nationalized insurance companies follows a periodicity of five years, i.e. 1^st August 1987, 1^st August 1992, 1^st August 1997 and 1^st August 2002. Thus, it is evident that in normal circumstances wage revision should have taken place in the year 2002 instead of 2005.

          Classification made by the employer on the basis of seeking premature retirement on the basis of two sets of retirement schemes is not sustainable being irrational and discriminatory.

          The object sought to be achieved by the issuance of the Notification dated 21^st December 2005 was to give the revised pay scales which were due in 2002. In fact, this has been done by giving retrospective effect vide Notification dated 21^st December 2005. It is, thus, held that classification created on the basis of insertion of sub-clauses (a) and (b) in second proviso of Para 3 is violative of Articles 14 and 16 of the Constitution of India.

         The respondent No.2 being the “State” within the meaning of Article 12 of the Constitution of India its actions are subject to the constitutional limits and the same are to be judged in the light of the fundamental rights granted by Part-III of the Constitution. The action of an instrumentality or the agency of the State must be in conformity with Article 14 of the Constitution. The option given by the petitioner cannot bind him as it is violative of Article 14 of the Constitution of India and it also runs against the public policy. The action of the respondents is not supported by any rational basis or intelligible differentia.

The ratio of the judgment of (2006) 3 SCC 708 cited by Mr. Ashwani Sharma is not applicable to the facts of the present case for the simple reason that in the present case the petitioner was in fact in employment as on 1^st August 2002, the date from which the Notification (Annexure P-4) dated 21^st December 2005 has been made applicable.

Consequently, in view of the observations made above, send proviso of Para 3 of the Notification dated 21^st December 2005 is struck sown being ultra vires to the extent it deprives the petitioner and other similarly situated persons to get the benefit of revised pay scale with effect from 1^st August 2002 after applying the principle of severability.

According, the petition is allowed. The petitioner is held entitled to get the revised pay scale corresponding to his post he was occupying as on 1^st August 2002 till 15^th March 2004. The respondents are directed to work out the arrears etc. within six weeks from today.

December 3, 2007                                                                                      (Rajiv Sharma), J.

(Source: Supreme Court and High Court judgments relating to Insurance.)

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  Thus wage revision arrears' payments with accrued interest (compounding) as per nationalized bank rates, as on actual date of payment, must be made immediately to all the affected resigning ex-employees, by all the nationalized insurance companies!

    The corresponding difference in Statutory Retirement Benefits like Provident Fund, Gratuity, etc. must also be paid simultaneously.

  We hope the Government of India is listening and will take prompt and appropriate action.

    Let's together rewrite History!