Captive service entities of PSUs, such as HITPA, are often underutilised. Analyse the governance and efficiency implications.

A captive service entity is a subsidiary that public sector undertakings (PSUs) set up to do work in-house. One example is Health Insurance TPA of India Ltd. (HITPA), which the four public-sector general insurers promoted to process health claims. The CAG found that these four promoters used only 3.68% of HITPA's capacity, even though its performance was comparable to leading TPAs [1]. This underuse has costs for both efficiency and governance.

Efficiency implications

• Idle public capital: HITPA had the capacity and a presence in major cities, but its promoters gave it only a small share of their work [1]. The return on public investment falls.
• Fee outflow: All four insurers sent a large share of their business (15–44%) to one private TPA [1]. The administration fees for this work leave the PSU group.
• Weaker control over claims: 72% of health claims in FY24 were settled through TPAs [2]. Outsourcing them weakens the insurers' direct check on inflated claims, which was the reason for having a captive TPA.
• Coordination failure: Each of the four boards decides on its own, so their shared asset stays underused.

Governance implications

• Weak audit follow-up: More than four years after the 2022 CAG recommendation, the insurers' RTI replies show no clear action on it [3]. Audit paragraphs on PSUs go to the Committee on Public Undertakings (COPU) and are tracked on paper, outside the online Audit Para Monitoring System (APMS). In August 2025, Action Taken Notes (ATNs) were still pending on 61 PSU paragraphs [4].
• Uneven disclosure: New India Assurance and Oriental Insurance cited Section 8(1)(d) (commercial confidence) to refuse every question. United India and National Insurance shared some data [3].
• Exemption stretched too far: In ICAI v. Shaunak H. Satya, the Supreme Court held that 8(1)(d) applies only where disclosure would harm someone's competitive position [5]. Section 8(2) allows disclosure when the public interest outweighs that harm [6]. Data on how much work insurers give their own subsidiary hardly meets this test.
• Counter-view: Choosing a TPA is a board's business decision, and contract rates may really be sensitive. That justifies withholding parts of the information, not refusing everything.

Under-allocation → idle capacity + fee outflow
        ↓
CAG flags (2022) → no online ATN tracking → RTI refusal → accountability gap

Flowchart: how underuse becomes a governance failure

Underuse turns a cost-saving tool into a double loss, of money and of accountability. The way forward:

• COPU should ask the insurers for a dated ATN.
• CAG should bring PSU paragraphs into APMS [4].
• The Department of Financial Services should require all four insurers to report HITPA's share of their claims in their annual reports.
• Insurers could set a minimum allocation to HITPA that is linked to its performance.

These steps would make captive entities serve the purpose they were created for, in line with the transparency aim of the RTI Act.