Budget 2013: Insurance penetration in smaller cities

Insurers may be a little disappointed as the budget didn’t seek to make insurance more attractive by increasing the section 80C deduction limit of Rs.1 lakh, but what may cheer them up is that the finance minister has taken measures to increase the penetration of the sector from the supply side.

Higher penetration

In his budget speech, the finance minister, has allowed insurance companies to open up branch offices in tier II cities and below without prior approval from the Insurance Regulatory and Development Authority or Irda. “Insurers need prior approval of the regulator at the time of opening any office but that’s never been a major issue,” says G. Murlidhar, managing director, Kotak Mahindra Old Mutual Life Insurance Ltd. To this effect, the government will also set up at least one branch office of state-owned Life Insurance Corp. of India (LIC) and one state-owned non-life company—United India Insurance Co. Ltd, National Insurance Co Ltd, The Oriental Insurance Co Ltd or The New India Assurance Co Ltd—in all towns of India with a population of 10,000 or more by the end of FY14.

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Budget 2013: Finance Ministry urges PSUs for extra dividend

NEW DELHI: The finance ministry is knocking on the doors of cash-rich public sector units for higher dividends in its usual pre-Budget rush to raise funds that could also bring some cheer to investors.

"PSUs have been sounded out for additional dividend payouts and discussions have begun," said a government official privy to the development.

North Block is leaving no stone unturned to meet the fiscal deficit target of 5.3% for the fiscal and additional dividend income would help it meet any shortfall on the account of spectrum sale targeted at Rs 40,000 crore or tax mop-up.

The ministry has started the pre-budget consultations with central public sector enterprises on the issue.

The Budget 2012-13 has pegged receipts from dividends and profits at Rs 50,152 crore but the finance ministry not only wants to ensure that the target is met but to exceed it.

The Standing Conference of Public Enterprises or SCOPE, the apex body of central government-owned public enterprises, also shot off letters to PSUs about two weeks back cautioning them to spur their investment programmes to avoid paying higher dividends this year.

The government had managed to extract an additional about Rs 7500 crore over its budget estimates in the last fiscal.All profit-making companies in which government has majority stakes are required to declare a dividend of 20% of government's equity or 20% of profit after tax, whichever is higher.