Throwing more light on the passage of the Insurance (Amendment) Bill in the Rajya Sabha, Jayant Sinha, Minister of State for Finance said it was historic moment for the government’s growth agenda.
He also assured that the bill ensures insurance premiums will not leave the country. “Citizens in this country should be very reassured that their premiums will stay in the country and will be used to of course make payments on claims but also at the same time be used to build and strengthen the country,” he assured.
Below is the transcript of Jayant Sinha’s interview with Shereen Bhan on CNBC-TV18.
Q: Congratulations are in order. It has been almost a decade we have been waiting for this bill to go through and finally the upper house pushing it through?
A: Yes, indeed it is a historic moment for India’s reform agenda. We were very fortunate that we got the support of most of the parties particularly the Congress part for the bill today. So, there was bipartisan support for the bill and what the bill in fact reflects is the hard work and the contribution of many eminent and distinguished people that have worked on it.
I must congratulate honourable Finance Minister, Shri Arun Jaitley who worked very hard to be able to build this bipartisan support for the bill.
Q: If you can take us through some of the key amendments because in parliament you tried to allay apprehensions that some of the opposition leaders had with regards to the insurance bill going through but on the issue of management control resting with the Indian promoter, this is something that even members of the select panel had said ought not to have been done. Why the decision to stick with this?
A: We have been very clear. There is a bright line that has been drawn in terms of management control and we intend to follow what is in the Companies Act in terms of control to ensure that these insurance companies as they grow and thrive are very much Indian companies.
Q: On the issue of premiums not being exported out of the country, taken out of the country – so in that sense this is not a new safeguard that has been brought in but do you anticipate significant new foreign direct investment coming in on account of this change in the FDI ceiling?
A: As far as the premiums are concerned, that clause has always been part of the bill even starting as early as 2008 when the first bill was drafted. So, that safeguard has always been in place. Both honourable members in the Rajya Sabha, as well as citizens in this country should be very reassured that their premiums will stay in the country and will be used to of course make payments on claims but also at the same time be used to build and strengthen the country.
Q: You also made the argument about the money coming in being used or being put to use as far as building the India Infrastructure story is concerned so, you articulated that this is going to be a win-win. There is a commitment now that 15 percent will actually go towards infrastructure development?
A: Yes, that is part of the regulations.
Q: As far as the insurance bill is concerned, what can we expect the fate for the land bill, do you intend moving the land bill to the Rajya Sabha before the summer recess?
A: Each bill has to be considered on it own merits. In this particular case, the insurance bill of course as I have said had been worked on by the people across the aisle – both as far as the congress is concerned as well as the BJP is concerned.
If you remember, the bill was sent to standing committee between 2008 and 2011 where in three years, I believe about 88 amendments were proposed by the standing committee which was of course headed up by my father who represented the BJP’s perspective. Then when the bill was initially brought to the Rajya Sabha in August, 2014 the select committee which was constituted included people from both sides as well.
In each bill one has to look at the merits, we have to make sure that we build support from across the aisle that the people’s concern and issues are full addressed and that is the best way to move forward in a democracy. I am very proud and happy that that is indeed how we moved forward today as far as the insurance bill is concerned.
Q: We have already heard from two companies on this channel, Sunil Bharti Mittal saying that their joint venture partner, Axa is committed to hiking its stake to 49 percent and they are going to be moving an FIPB application shortly and we also heard from the Max group Chairman, Anajjit Singh where Bupa has already filed its FIPB application to hike its stake to 49 percent and they are looking at hiking, bringing multiple partners or are in conversation with multiple partners as far as their life insurance business is concerned. What are picking up in terms of the interest both from companies that have existing joint venture partners and new money coming into the sector?
A: That is wonderful news and I am very glad that both these companies have indicated that they will in fact be getting the FDI. One of the concerns that was expressed in the Rajya Sabha from some honourable members from the Left was that even if the FDI limits were increased, that the insurance sector would not see fresh capital coming in from the outside.
I am very glad that these announcements have already been made and now that we have put in place a stable and predictable regulatory and legislative regime and a set of laws that really clarify how the sector can grow and evolve. I am quite sure that we will see a great deal of interest from insurance companies around the world.
Q: What is your own estimation of the kind of money we are talking about that could possibly be coming in over the next few years?
A: It is hard to say. It depends a lot of course on the valuations for these companies and so on but what we have estimated is that if we have to increase insurance penetration from three percent which is roughly where it is right now to six percent then we will require somewhere in the range of Rs 40,000-50,000 crore which of course 49 percent will have to come as FDI.
So we are really talking about investments in the range of Rs 25,000 crore in the insurance sector to really ensure that it gets to six percent penetration that we think should be a medium term target.
One final thing which is of course as I said it was quite historic that the bill got passed. I also said that many people have worked on this over the years and it is in fact an accident of history that I was in a position that I was able to get through the Rajya Sabha. So I feel very privileged to have had the opportunity.