With the Congress and BJP on the same page in Rajya Sabha’s Select Committee on changes in India’s insurance laws, the Insurance (Amendment) Bill is inching towards consensus and other things being equal, could be cleared in the Winter session of Parliament.
The Select Committee of the Rajya Sabha is currently considering the bill and is understood to have recommended raising the existing FDI cap in the sector from 26 to 49 per cent with foreign investors (including portfolio investors) not exceeding 49 per cent.
The fear of ‘hot money’ or portfolio or Foreign Institutional Investment overtaking the sensitive insurance sector had been voiced first by the BJP (which under the leadership of former Finance Minister Yashwant Sinha had opposed raising FDI caps altogether) and then by the Congress.
Congress MP in the Rajya Sabha, Anand Sharma had said in his speech in August this year: “FDI means that it’s a tangible investment, solid investment coming in a particular sector for business purposes and when a sectoral cap is there, the issue of ownership and control comes in, which means even if you go up to 49%, the ownership and control is very clearly defined. There were two definitions earlier and even now for that matter, one is of the companies, second is the definition under the FDI so that there is clarity on what we do mean by Indian ownership and control. The change that has happened is that the BJP has proposed portfolio investment as part of FDI. This is a sensitive sector…”
The Congress stance had given rise to an impression that the party wanted more clarity on FIIs in the insurance sector.
However, latest indications are that it has made its peace with a composite cap. So the Select Committee, which has time till 12 December to table its report, will meet on Monday to finalise the report. Left, JD(U) and TMC are likely to table dissent notes to the report.
The committee, headed by BJP MP Chandan Mitra, will seek to convince members of the need to raise the FDI cap as it would help the sector to meet its growing financial requirements.
Despite the demands of the Left that Indian owned and Indian controlled, be specifically defined afresh, the committee is believed to have not accepted such a demand as it found no need to redefine Indian ownership again for 49 per cent. Other crucial recommendations of the Committee include accepting the unanimous view of all members to enhance the minimum capital for health insurance companies from Rs 50 crore to Rs100 crore.
The Select committee is also in favour of entry of multinational insurance brokers so that they can rejig the existing scenario in the insurance sector and have left it to the IRDA to frame the needed regulations.
The report could still see slight alterations before it is tabled in Parliament as members could still insist on changes.
Although the government can take comfort from the fact that its draft report would pass without glitches in the Select committee and could even be tabled in Parliament, whether it would succeed in getting the bill passed in the upper house with the current stalemate in place, is questionable. Congress sources admit that although they are not opposed to the Insurance amendment bill, it is not the priority for them in this session. “The government should more worried about the logjam in Parliament than anything else now,” said a senior Congress leader.