CHANDIGARH: There is a need for transparency in the valuation of LIC for the purpose of IPO as there is a gross underestimate of the same, said EAS Sarma former Secretary to Government of India in a letter to Nirmala Sitharaman Union Finance Minister.
EAS Sarma writes that according to the latest reports the estimated value of the public issue is Rs 15 lakh Crores and the so-called "embedded value" of the Corporation is Rs 4 lakh Crores. The methodology of valuation, the assumptions that have gone into it, the factual information considered by the valuer have not been divulged in the public domain.
All India Power Engineers Federation (AIPEF) on Monday has circulated the letter of E A S Sarma amongst various persons , which objects to the proposal of the government of India to undervalue LIC and then sell off the equity to vested interests, said V K Gupta spokesperson.
Sarma feels concerned about the manner in which LIC is being "valued" for the purpose of the IPO. He recalls how the finance ministry had grossly undervalued a highly competent, Central Electronics Limited (CEL) at a rate several orders of magnitude less than its intrinsic valu and how the ministry had almost sold the company away to a private firm of questionable antecedents, till people raised their voices against it.
It is equally unfortunate that important matter as the disinvestment of a strategic CPSE is held so casually.
He feels that departmental inquiry into the CEL matter, the center is only trying to obfuscate the contentious issues that revolve around it and delude the public. There is a serious public concern about how the embedded value of the LIC has been determined. It is only working with the narrow intention of handing it over to a few profit-driven investors.
Sarma laments that in Planning Commission there used to be a Project Appraisal Division (PAD) that had built the professional capability to carry out a social-cost-social-benefit appraisal of public investments, Unfortunately, the present-day Niti Ayog has neither the time nor the inclination to consider the social dimension of public investments and public institutions. He suggests that the entire process of disinvestment of the LIC be put on hold.
AIPEF calls upon civil society members and the public to oppose the move to sell off LIC equity on a grossly undervalued basis and Finance Minister should scrap the proposal to sell off LIC.