Insurance and pension get FDI boost, need parliament nod
“We will reach out to all political parties, especially the principal opposition party, to get the reforms bills passed,” Finance Minister P Chidambaram told reporters after the cabinet gave its nod to raise FDI in insurance to 49 per cent from 26, and allow at least 26 per cent foreign investment in pension funds. The cabinet also cleared amendments to the Forward Contracts (Regulation) Amendment Bill, 2010, the Companies Bill and Competition Act.
The decisions follow the government’s move last month to raise the price of diesel, limit LPG subsidies, allow FDI in multi-brand retail and open up the civil aviation sector to foreign airlines. Those decisions encountered stiff opposition from the Trinamool Congress and opposition parties and caused Mamata Banerjee to quit the UPA coalition.
While accepting that Thursday’s bills would have to pass muster in parliament, Chidambaram maintained that he had no reason to feel the reforms measures would not be supported by other parties. “I don’t think we should jump to conclusions at this stage. Now that the cabinet has passed the amendments to the legislations, we will be seeking support from all political parties, especially the principal opposition,” he said. The bills are likely to be pushed for passage in the winter session of parliament.
“Obviously we need to sit and talk. After all, the process of making law is that of negotiation, discussion and finding consensus. I am hopeful that we will get support,” he said. Chidambaram pointed out that a bulk of the recommendations by the standing committee on finance headed by the BJP’s Yashwant Sinha had been accepted by the cabinet.
However, he admitted that the critical recommendation of the committee to let the FDI cap in insurance remain at 26 percent had been rejected by the cabinet. He said it was the government’s view that foreign investment would flow only if the cap was raised to 49 percent. The finance minister also pointed at BJP president Nitin Gadkari’s recent remarks that his party was not opposed to FDI in principle and favoured it in sectors other than multi-brand retail.
The BJP refrained from committing its support to the insurance and pension reforms bills and said that it would like to see the “fine print” first. The Trinamool said it would oppose the measures and even talked of moving a no-confidence motion in the coming winter session.
The finance minister, however, maintained that he was hopeful and said the benefit of the insurance sector reforms would go to private sector insurance companies. He also clarified that state-run insurance companies will remain in the public sector. Chidambaram said the FDI cap in the pension bill would follow the limit in the insurance bill, as they went hand in hand. “If insurance bill passes with 49 per cent, pension will also be 49 per cent,” he said.
The cabinet committee on economic affairs also scrapped a proposal to develop a Rs 93,000 crore petrochemical hub in Haldia in West Bengal as the TMC state government had informed it in February that it was not keen on the project.