In the race to bag the contract for the R&R annuity outsourcing project in Uttar Pradesh, public sector insurance firm Life Insurance Corporation of India and Allahabad Bank may be one up against other insurance companies that have evinced interest in the project.

The Insurance Regulatory and Development Authority (Irda) has so far refused to give its approval for the performance guarantees that the insurance companies have to give before submitting their request for proposal.

At a pre-bid discussion meeting, insurance companies ICICI Prudential Life, Bajaj Allianz and SBI Life Insurance requested the state government not to make it mandatory for the companies to submit performance guarantees as Irda was not giving its approval for the same. However, the state government said it was mandatory to get an approval from RBI and Irda.

It may be mentioned that this is the first time in the country that attempts are being made to link the irksome land acquisition process with the livelihood issues of farmers and devise a hassle-free compensation technique. The innovation calls for culling an absolutely new financial product and the process has thrown open a host of issues before all the stakeholders: the state government, the financial institutions and also for the respective regulators, as disbursement of annuity for as long as 33 years has not been the core business of either the banks nor the insurance companies.

Speaking to FE an official said, ?The government has made mandatory for the financial institutions to obtain the regulators? approval before being considered with any seriousness,? he stated.

Apart from this, some of the interested bidders have also expressed the desire that the state government not fix the bid rates for 3 years but review it on a 6-monthly basis through a pre-determined formula linked to some market indicators. ?In order to cover their own risk in a highly volatile market scenario, some of the companies have asked us to consider linking the bids automatically with the fluctuations of the market rates,? said the official, adding that the government was open to doing so.

As per this policy, dispossessed landowners and farmers will get Rs 20,000 per acre per year for 33 years, along with the additional amount of Rs 600 increased annuity per year.

The next discussion meeting on these clarifications would be held on February 22 and the bids are expected to be submitted by the first week of March.