Why is LIC headless for a full year?
It is a truth universally acknowledged that a company in possession of a good balance sheet must be in want of a good chairman. That rule, it would seem, does not apply to India's largest domestic institutional investor, the Life Insurance Corporation.
As of today, the country's largest insurer – which controls assets worth Rs1.2 trillion – has gone without a full-time chairman for a full year. Which is worrying, because LIC also happens to be the government's lender of last resort, a bailout knight, if you will, especially when it comes to floundering divestment efforts.
Current acting chairman D.K.Mehrotra took charge on May 26, 2011, initially for a period of three months. But rather than choosing a candidate for a longer term, the finance ministry has preferred to continue extending Mr Mehrotra's tenure by three months each time.
The current situation at LIC started when the three-year term of former chairman T.S Vijayan came to an end in May 2011. Though he was eligible, the Government decided not to extend his tenure by another two years. Vijayan lost out towards the end of his tenure when the scam in LIC Housing Finance became public with questions raised on issues of corporate governance.
On completing his tenure, Vijayan proceeded on a long leave. As a stop-gap measure, the government appointed Rakesh Singh, additional secretary, Department of Financial Services, to manage LIC. It later nominated Mehrotra as acting chairman.
Although the search committee, comprising senior finance ministry officials and officials Insurance Regulatory and Development Authority (IRDA), zeroed in on the name of Mr. Mehrotra for the position, a final decision is pending with the Appointments Committee of the government.
At a time when there is pressure on LIC to reduce its stake in many listed companies to below 10 per cent to adhere to IRDA norms, and questions being raised on the rationale for subscribing to ONGC shares via the auction route so heavily, the nonexistence of a full-time chairman is only puzzling, to say the least.
The question that now needs to be asked is whether this is just another example of UPA-II's so-called policy paralysis, or is there something more to leaving the country's top insurer headless for a full year?
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