NEW DELHI, May 27: The Union Cabinet has significantly relaxed the investment norms for the Life Insurance Corporation (LIC) and General Insurance Corporation (GIC).

In a move which will have far-reaching impact on the functioning of the two state-owned corporations, the government has given them freedom to invest unlimited sums in non-scheduled and non-consortium investments. These, however, would be subject to prudential norms, said sources in the Finance Ministry.

Earlier, LIC had to seek government permission for making individual non-scheduled, non-consortium investments beyond Rs 10 crore. Similarly, GIC was required to seek government approval for making individual `unapproved' investments beyond Rs 5 crore.

In a bid to prepare the state-owned companies for likely competition from the private sector, the government has in one stroke provided them investment freedom which had been sought for quite some time.

Explaining the significance of the decision, official sources pointed out that henceforth LIC and GIC could investment, say Rs 200 crore or more, without having to seek permission.

Finance Minister P Chidambaram had in his Budget speech promised to strengthen the state-owned companies. The current decision is in pursuance of that promise. The Standing Committee of Finance had in its recent report also suggested that LIC and GIC be given more functional freedom to make them truly competitive.

The government has already introduced the IRA Bill which was being described as a prelude to the liberalisation of the insurance sector. With the standing committee on finance having given green signal to the Bill, it is likely that the insurance sector would be opened to private participation sooner than later.

The Union cabinet also approved formation of a joint venture company by Gas Authority of India, Indian Oil Corporation, Bharat Petroleum Company Limited and the ongc for importing liquified natural gas (LNG).

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