The decision by the Life Insurance Corporation of India to invest about 1.5 lakh crore in Indian Railways is a welcome move indeed.
Even though the LIC has been investing in public-sector firms for the past several years, the latest decision committing a whopping 1.5 lakh crores for the growth of Indian Railways, another public sector transport institution linking every nook and corner of the country and ferrying huge quantity of freight and lakhs of passengers every day, has once again proved that LIC is the most dependable automated teller machine for the government.
It is worth recalling here that LIC manages assets worth Rs 13 lakh crore which is equal to 15% of India's gross domestic product of Rs 85 lakh crore. Its investment in government-owned companies as on May 2012 was about Rs 1 lakh crore. This is the first time that LIC has unveiled its intention to invest such a huge amount for a single entity.
LIC, a Government of India enterprise founded in 1956, is the largest life insurance company and also the largest investor of the country.
Over the years, LIC, which had been patronized by one and all with numerous policies and registering upward revenue year after year, was facing difficulty in managing the ever-accumulating funds.
After a thorough analysis of options before the Corporation, LIC decided to invest those extra funds to get good returns.
However, its policy to invest in share market met with stiff opposition from the policy holders, who decried that it was an ill-advised move.
With its market-linked policies proved a trap, LIC slowly withdrew from the markets and started focusing on government companies.
One may argue that considering LIC's huge corpus, these investments in PSUs, are like a drop in the ocean. Thus, they do not present substantial risk to policyholders.
But this does not give LIC the right to overlook policyholders' interest and make investments on their whims and fancies.
It is very important now that the money is spent judiciously. Otherwise it would further deteriorate condition of already sick Indian Railway. It would turn into a high debt company. There needs to be professional SPV implementing projects.
The list of corrective measures is endless. We hope the Railway Minister would go in details of these shortcomings and rectify them. Otherwise, all the money would go down the drain.