Serious political differences and time constraints will prevent the Manmohan Singh government from passing the contentious Insurance (Amendment) Bill in the current session of Parliament. The bill seeks to raise foreign direct investment limit in the insurance sector to 49 per cent from 26.
The Insurance Bill was introduced in Rajya Sabha in December 2008 by the first UPA government — by the then Finance Minister P Chidambaram — as part of the UPA’s financial sector reforms. It is seen as crucial by foreign investors to India’s commitment to reforms in this sector.
When asked if he expects the bill to be passed in the Budget session, Finance Minister Pranab Mukherjee last night said traditionally little legislative business is done during the Budget session. The Parliamentary Standing Committee on Finance, to which the bill has been referred, has held two meetings so far and is unlikely to finalise its report before April. At these meetings, sources say, not just the BJP and the Left parties, but even UPA allies like the Dravida Munnetra Kazhagam (DMK) have opposed the government’s move to expand the scope of foreign capital in the insurance sector.
"Our party asked why, when several big insurance companies have failed on foreign soil, the government is so keen to open up India’s insurance sector further to allow them to recover their losses from the Indian masses," Moinul Hassan, CPI(M) member in Rajya Sabha and member of the Standing Committee on Finance told Business Standard.
Another key bill — the Life Insurance Corporation Amendment Bill that seeks to raise the minimum capital of LIC to Rs 100 crore from the current Rs 5 crore — will face hurdles from the finance standing committee as well.
According to sources, the committee may not approve the government’s plan to raise LIC’s capital base. The committee, which met last month, has convened another meeting on March 10 to discuss its draft report on the LIC bill. The committee, led by BJP’s Murali Manohar Joshi, will challenge the government’s argument for expanding LIC’s capital base.