Modi, clean public finance of the dregs

In our 22 July 2014 edition, we presented a detailed report of how utterly and severely compromised are our insurance and public finance sectors, with the IRDA (Insurance Regulatory and Development Authority) itself being the hotbed of serious corruption.

 Not only did we provide a comprehensive and exhaustive account of how the current IRDA chairman, TS Vijayan, had presided over questionable decisions on the part of the Life Insurance Corporation of India (a public sector company with largest share in the life insurance market) when he headed it, we also detailed how public money, to the tune of Rs 750 crore, was inexplicably and unethically awarded to Unitech, a private sector company that is also a ‘willful defaulter.’ Inasmuch as the decision by then Vijayan-led LIC has been deemed unscrupulous by an inquiry carried out by the Central Vigilance Commission (CVC) at the behest of the finance ministry itself, on what basis is the man still being allowed to continue as chairman of IRDA? The Rs 750 crore loan default of Unitech (which it was granted in two parts – as rupee term loan of Rs 200 crore and as non-convertible debentures worth Rs 550 crore, procured through secondary market operations from LIC mutual funds) is a glaring example of how public money, in this case life insurance money deposited by over 28 crore trusting and hard-working men and women, is being siphoned off to sponsor nefarious non-developmental activities of private companies.

To add to the gravity of the crime, such practices are allowed to take place with complicity from top politicians. It comes as no surprise, therefore, that the current chairman of the biggest regulatory authority presiding over the entire insurance industry, including 24 life insurance companies, 24 non-life insurance companies and three health insurance companies, is a personal favourite of former finance minister P Chidambaram.

Notwithstanding its tough stand on the twin issues of corruption and black money, the new regime at the centre has to cleanse the public sector (especially in banking, finance and insurance) of dishonest elements in order to unlock the bottlenecks in revenue generation and allocation. Given that Unitech used the LIC-granted money for purposes other than what was sanctioned during awarding of the loan, and inasmuch as LIC cast a blind eye to serial misappropriation by the private sector company, this is a serious breach of trust and law. We urge PM Modi to consider the matter and take immediate action.