The Department of Investment and Public Asset Management (DIPAM) has asked the Department of Financial Services (DFS) to get the issue of merger of three state-owned insurance companies examined and prepare a fresh roadmap. There is a view within the government that the issue needs to be thoroughly examined before rushing into a merger.
Consultancy firm EY has been shortlisted to advise the department on the proposed merger. “If the terms of reference have not been finalised, they can be asked to look at all the issues or else the DFS can appoint another consultant to undertake the review,” said a DIPAM official, who did not wish to be identified.
“The merger is ruled out for this year. The idea is that the fresh review will be ready next year and the government of the day can take a view,” the official said, adding that the government did not want to undertake a merger such as the one involving Air India and Indian Airlines.
The official said all issues including value for the stakeholders from the merger would be examined.
Finance minister Arun Jaitley in his 2018-19 budget speech had said that the three public sector general insurance companies — National Insurance Company, United India Assurance Company and Oriental India Insurance Company will be merged into a single insurance entity and will be subsequently listed. The plan was part of the overall government strategy for consolidation in the public sector enterprises space. Shortfall of capital was also seen as a hurdle in the merger process and recapitalisation is in the works.
The government had planned to complete the process in the current fiscal year but will have to wait for now. It aims to raise Rs 80,000 crore from stake sales in state-run firms in the current fiscal year and so far it is running short of the target.