Taking forward pending financial sector reforms, finance minister Arun Jaitley will meet state finance ministers next month to give a push to the pending Goods and Services Tax (GST), the new indirect regime touted as a big-ticket reform necessary to boost investor sentiments.
In a related move, the department of financial services has been asked to look at ways to raise capital for insurers without a hike in the foreign direct investment limit for the sector.
The issues were taken up during separate presentations to Jaitley on the GST and key issues in the financial services sector.
“The minister has expressed his intent to meet all the state finance ministers around June 15-16. We will work out a schedule with the Empowered Committee of state finance ministers. They have to give their comments on the Constitutional (115th Amendment) Bill, 2011,” a government source told The Indian Express.
The source added that the Bill is likely to retain its original structure indicating that contentious issues like inclusion of petroleum and alcohol under the ambit of the new tax regime is likely to stay despite opposition by several states.
The two tax departments — Central Board of Direct Taxes and the Central Board of Excise and Customs — are also expected to make presentations to minister of state for finance Nirmala Sitharaman on Friday.
Meanwhile, the issue of stressed assets of public sector banks due to rising bad loans as well a plan to help insurers raise capital were among the key issues taken up by the department of financial services in their discussion with Jaitley.
“Now we have to look afresh on the insurance sector ...whether there could be some other instrument (to permit private companies to raise funds) without raising (FDI cap) to 49 per cent. All these issues we have to address and then come back to the government,” said GS Sandhu, financial services secretary after the presentation.
While the UPA was keen to hike the FDI in insurance to 49 per cent from the existing 26 per cent, the standing committee on finance led by senior BJP leader Yashwant Sinha had cautioned against it in the wake of the global financial crisis of 2009.
While stressing that no decision has been taken on the issue, Sandhu said, “We have to examine a few issues on what are the other options available to attract capital. Whether there are other options available, whether we could go in a more gradual manner.”
One of the options with the finance ministry is to raise the FDI cap in various insurance segments in a phased manner.
“We will see whether we need to take up this whole hog in all categories of insurance or we can start in some particular categories first. We have to examine that. Then we have to talk to major players and see what could be other options apart from this,” Sandhu said.
With limited resources, the finance ministry is also keen for banks to consider raising about Rs 8,000 crore of capital on their own and is discussing these options with the Reserve Bank of India. The issue was also discussed at a meeting with state-owned lenders earlier this month.