winsight 20: LIC, national security, and a modified reality

The government wants to sell the Life Insurance Corporation of India (LIC), which is worth about Rs 34 trillion (USD45 billion). The stage has been set with increasing foreign direct investment (FDI) in insurance to 74%, followed by Initial Public Offer (IPO) this year. This is ostensibly to enhance transparency, enhance accountability by enabling the common citizen to have shares of LIC and decide its policies, and unlock value. The move has been met with disbelief and dismay.

Just as a person with a hammer sees every situation as a nail, every trader (the base of the governing party) sees everyone and everything as goods to be bartered or sold. The petty traders see only the short term value, and the adrenaline high of money in the bank, even if they have sold family silver at a deep discount. With the economy in tatters due to mismanagement - the Tughlaq-esque demonetisation, botched rollout of GST, and the sociopathic response to Covid-19 - this is a firesale on a large scale, knowing fully well that it is to help the crony capitalists. However, as will be elaborated below, the sale is myopic but not just because of crony capitalism, but due to a much more serious, irreversible, and permanent, degrading of national security.

There has been some resistance on the following lines - ranging from economic to the argumentative to the absurd. The economic one goes something like this: Started with just Rs 50million, it has grown to a Rs 34 trillion behemoth, serving the interests of the nation all the while. It returns substantial profits to the government and the policy holders, and is the bank of last resort as in the case of taking over bankrupt institutions. Yet others (the absurd since capital is agnostic) point to the absurdity of a Hindu nationalist government selling family silver to foreigners - with the majority shareholding gradually but irrevocably shifting to sovereign funds, most likely owned by Christians, Muslims (both ‘enemies’ of Hindutva), or the Chinese (anathema to the hyper-nationalists). In between are those who talk of its service to the nation, the lives it has changed, its record of prompt service, its role in social inclusion, killing the golden goose and so on.

To understand the full implications of the sale and its devastating consequences, we need to step back a bit. Let us rewind to why investments of controlling interest are made. An exploration of the Indigo offer for Air India, and the Tata takeover of the bankrupt Jaguar Land Rover (JLR) are illuminating as to what the ‘value’ really is.

First the case of Indigo and Air India. Despite the acquisition not being a right fit, Indigo was interested to buy the bankrupt Air India. The dissonance is at so many levels. Air India has largely useless Boeing aircraft of many different configurations and models - very inefficient since it results in non-swappable people and equipment - while Indigo flies only Airbus. Air India has flabby crew while Indigo is a lean organisation. Indigo is profitable, and an airline of choice. Air India is a blackhole, and the government has to order its officials to fly the airline so that it can shovel some money its way (apart from all the other subsidies, especially the much maligned ‘Haj’ subsidy). In other words, the airline is a basket case, so why did the smart people in Indigo want it? Simply because there were other major assets that the airline has - airport slots - that in the pre-pandemic era were worth more than gold.

When Ratan Tata acquired the loss making white elephant Jaguar Land Rover, it was not for the steel or the assembly lines or the lazy British workers - all of which he already had in abundance, and at much cheaper prices already. He looked beyond the obvious to acquire the patents and intellectual property. Those were the true targets of the acquisitions. Similarly when Tata bought VSNL it was for the other assets, mainly land and the bank balance, rather than the spectrum or customer base.

Of course, LIC is a financial institution, and a valuable one at that. But it is also much more. It has the trust of millions, but that would be monetised and encashed by the goodwill premium. What is the proverbial golden goose of the LIC? The actuarial tables developed and held by the LIC over decades are a goldmine of information regarding the risks related to critical infrastructure and the entire population at least for the next 100 years.

It has the risk profile of virtually every Indian demographic, including soldiers and doctors. This is critical data. Want to know when, how, and how many soldiers died and of what cause in Galwan, Goa, or Gangtok? As the army has group insurance from the LIC, it has the records. Other countries - friendly and hostile - will give an arm and a leg to lay their hands on this sort of information. The medical data of army veterans and politically connected persons has direct implications on national security, and is one of the favourite targets of hackers. As a perspective on how valuable this data is, and how pervasive and successful these targeted hacker attacks are, it is sobering that both the best defended databases of military medical information (US and Israeli) have been breached.

Add to that the fact that these policies are linked to the Aadhaar numbers, which are linked to bank accounts, linked to the income tax permanent account numbers (PAN), linked to the mobile phone numbers, linked to Arogyasetu and Covin, which have even more information about the individual, then the breadth and depth of the personal information being sold for a song becomes evident.

Strategic foresight is intrinsic to statecraft. Looking beyond the obvious to discern true value is basic to any business transaction. Only those living in modified reality (India’s version of ‘alternative facts’) will even think of parting with this critical national security information. Hyper-nationalists do not see value other than in monetary terms - or more likely, short term income to cover their backsides for mismanaging the economy, exacerbated by their mismanagement of the pandemic. The sale of LIC will haunt us for generations, and the nation will pay a very heavy cost. We cannot always wait for a Disha Ravi or Priya Pillai to point out that Modisha has no clothes or is destroying our future and come to our rescue. It is time to wake up.