Business moves do not get more ironical than this. When tobacco has been identified as the biggest preventable cause of death across the globe, public sector behemoth Life Insurance Corporation of India (LIC) has coughed up a huge amount to invest in tobacco companies.
LIC has invested more than Rs3,600 crore in three tobacco companies in 2010-11, an RTI query has revealed. Anti-tobacco activists and cancer specialists are outraged, and believe that it is unethical and ironical that India’s largest insurance company would invest in something that is injurious to health.
The information was sought by an activist’s consortium called Voices of Tobacco Victims. The public information officer’s (PIO) reply shows that LIC has invested Rs3,600 crore in three tobacco companies. Indian Tobacco Company (ITC) has seen the biggest investment of over Rs3,500 crore last year, while the other two companies are VST Industries and Dharmapal Satyapal (DS) Ltd, which manufactures smokeless (chewing) tobacco. LIC also owns shares of ITC, and the number has steadily gone up over the years—from 51 crore in 2009 to over 99 crore on 31 March 2011.
However, instances of the government holding shares in big companies are not new. The Specified Undertaking of the Unit Trust of India (SUUTI) held substantial shares in Axis Bank, ITC and Larsen and Toubro (L&T). These companies, though professionally managed, want the government to hold stock for fending off hostile takeover bids. British American Tobacco (BAT), the parent company of ITC, holds almost 32% stake in its Indian arm; and its attempts to gain a majority stake have been well-publicised.
Though the public insurer’s strategy may be perfectly legal, it is ethically incorrect for LIC to invest in tobacco companies without the prior approval of the investors, said Dr Vishal Rao, convener, Tobacco Free Bangalore and national executive member of the Federation of Head & Neck Oncology. “India is one of the early signatories to an international treaty called Framework Convention for Tobacco Control (FCTC). The huge investment by LIC in one of the biggest tobacco companies of India is surely against the spirit of FCTC,” he said.
In her reply, LIC CPIO (chief public information officer) Saroj S Dikhale has said that LIC does not charge any extra premium from tobacco users and smokers for issuing an insurance policy. “Depending on quantity, duration and type of tobacco consumption, while large numbers of customers are accepted without any extra premium, some of the applicants may be charged higher premium,” the reply said. However, it is not known how many claims have been rejected by LIC due to the insured’s habit of tobacco consumption.
According to a WHO (World Health Organization) study in 2010, around 34% of the population above 15 years in India consume tobacco in different forms. Minister of state S Gandhiselvam said in a written reply in Parliament a few months back that around eight to nine lakh Indians die every year due to diseases that result from tobacco consumption.
Dr PC Gupta, director, Shekharia Institute of Public Health said, “It is a shock that the investment with ITC has doubled in the last two financial years rather than coming down over the year. On one hand, the government is spending nearly Rs10,000 crore on treatment of tobacco-related illness and on the other hand, they are investing Rs3,500 crore in a leading cigarette manufacturer.”
A case against the harmful effects of gutka (chewing tobacco) is pending before the Supreme Court for an outright ban. “If the Supreme Court bans it, then what will happen to the invested public money in DS Group?” remarked Dr Pankaj Chaturvedi, associate professor at Tata Memorial Hospital, who has been working closely with the activist group.
Will LIC dump its tobacco shares? Only the health ministry can take a call—but the insurance giant is under the ambit of a different regulator.