PM hosts allies to dinner to move key reform Bills

Written by fe Bureau | New Delhi | Updated: Nov 17 2012, 07:38am hrs
Intense political standoffs notwithstanding, finance minister P Chidambaram on Friday sought to give some credence to the UPA's faltering reform agenda by suggesting hopefully that the odds favoured a productive Parliament session ahead. Later in the day, Prime Minister Manmohan Singh hosted a dinner for UPA leaders at his residence in an apparent effort to consolidate political support for the slew of reform Bills lined up. Singh's gesture reflects the anxiety of the government to perk up the slowing economy.

The UPA's two main outside supporters the SP and BSP have recently been extended such hospitality by Singh.

Addressing the media, Chidambaram reminded all political parties of a very heavy legislative agenda during the coming winter session and urged them to stand the government in good stead to carry the agenda through.

The government, which is working against a political calendar and facing the daunting task of reining in the fiscal deficit in a slackening economy, desperately wants to ensure that the reform Bills are approved by Parliament.

The important economic agenda for the winter session of Parliament beginning on November 22 includes amendment to the Insurance Bill to raise the foreign direct investment (FDI) cap from 26% to 49%, the Pension Fund Regulatory & Development Authority Bill, Banking Laws Amendment Bill, the long-pending Companies Bill, the Direct Taxes Code and the Land Acquisition Bill that seeks to make it easier for industry to mobilise land for projects.

Chidambaram said Singh had already met parties that are supportive of these Bills and would soon be meeting more allies.

Not everyone would share the minister's optimism, though, given that the BJP has said it would oppose FDI in retail in Parliament and even the DMK, a UPA constituent, maintaining suspense over its stance on the issue. The monsoon session was a washout as the BJP disrupted it over the coal mines allocation scandal.

Chidambaram said: "We sincerely hope that the forthcoming session will be a productive one and many Bills will be passed... My suggestion is that not one issue should be blown out of proportion. There are many very important issues that concern the welfare of people and future of country."

The Insurance Laws (Amendment) Bill, approved by the Cabinet recently, proposes to increase the limit on foreign investment to 49% from 26%, which, if approved by Parliament, could help address capital constraints in the sector, which needs an estimated $10-12 billion for expansion. The enhanced foreign investment limit will be composite, including FDI and investments by foreign institutional investors.

The Pension Fund Regulatory & Development Authority Bill, pending for long in the absence of political consensus but cleared by the Cabinet, will strengthen the sector regulator with statutory powers, besides throwing the sector open to foreign investment. As per the Bill, the foreign investment cap in the sector will move in line with that in the insurance sector.

The Companies Bill, which is also slated for the winter session, seeks to replace the extant Companies Act, 1956, and aims to give corporates more functional freedom while enhancing shareholder democracy. Three governments NDA, UPA-1 and UPA-2 have worked on this Bill, which also has a provision asking corporates to earmark 2% of their net profit for corporate social responsibility (CSR) initiatives.

Another important Bill coming up is the Land Acquisition, Rehabilitation and Resettlement Bill, which was introduced in Parliament last year. The Bill seeks to replace the 117-year-old Land Acquisition Act.

Recently a group of ministers had resolved certain contentious issues on this Bill and agreed to make it more industry-friendly. As per the latest version of the Bill, consent of two-thirds of the affected families will be needed to acquire land for projects involving private funds. Though livelihood losers would not have an opinion in the decision to sell, they would be given a specified relief package.

Analysts tracking the pension and insurance sectors also said that while there is a lot of interest from foreign investors with deep pockets in the Indian insurance and pension markets, it will take a while for FDI to flow in and for foreign investors to increase their stakes.

Incidentally, a parliamentary panel led by former finance minister and BJP leader Yashwant Sinha, which included even Congress MPs, had opposed any further increase in the FDI cap in insurance from 26%. The Trinamool Congress, SP, BSP, Left parties and BJD are also against any move to permit more FDI in insurance and pension. The BJP is okay with 26% FDI in pension.

With 22 MPs in the Lok Sabha, the SP an outside supporter of the UPA government will hold the key to the passage of legislation. However, the government is in a minority in the Rajya Sabha.