The Union cabinet is set to decide on changes in the FDI policy to allow overseas participation in the mega IPO of Life Insurance Corporation, which the government wants to do in this fiscal itself.

An inter-ministerial consultation on the changes in the policy is in the final stages, a senior government official said on Wednesday.

“Hopefully, it should happen very soon... All the comments that will come (from different departments) will be supportive (of the proposal),” the secretary of the department for promotion of industry and internal trade (DPIIT), Anurag Jain, said.

He also expressed hope that the cabinet will soon take up this proposal. The DPIIT is making changes in the FDI policy to facilitate the disinvestment of LIC, after taking views from the finance ministry.

According to the current FDI policy, 74 per cent foreign investment is permitted under the automatic route in the insurance sector. However, these rules do not apply to Life Insurance Corporation of India (LIC), which is administered through a separate LIC Act.

According to Sebi, both FPI and FDI are permitted under the public offer. However, since the LIC Act has no provision for foreign investments, there is a need to align the proposed LIC initial public offer with existing Sebi norms regarding foreign investor participation.

The cabinet had in July last year approved the initial public offering (IPO) of LIC and the stake sale is being planned in the current March quarter.

The finance minister has directed that the disinvestment has to be completed during the current financial year, “so, obviously, we will try to expedite it (Cabinet note) as much as possible,” he added.

IPO filing next week

The government is likely to file draft papers for the mega initial public offering of LIC with market regulator Sebi by next week. A portion of the issue would be reserved for anchor investors, Tuhin Kanta Pandey, secretary to the department of investment and public asset management (Dipam), said.

He said Dipam was awaiting the approval of the insurance regulator.

The issue, after approval of Sebi, is likely to hit the market in March, he said. LIC's listing is crucial for the government to meet the lowered revenue estimates of Rs 78,000 crore for the current fiscal.

“Within 7-10 days, the the draft red herring prospectus for LIC IPO will be filed. Informally, we have been consulting Sebi on various issues. The size of the issue would be mentioned in DRHP,” he said.