Finance standing panel clears pension reform Bill

Written by Nistula Hebbar | Nistula Hebbar | New Delhi | Updated: Oct 28 2011, 11:16am hrs
A key financial sector reform will be rolled out in Parliaments winter session, signalling a tacit understanding between the government and Opposition to let the reform juggernaut roll despite political battles. Sources confirmed that the Pension Fund Regulatory and Development Authority (PFRDA) Bill has been cleared by the finance standing committee without major changes.

The Bill envisages part-investment of pension funds in stocks. It proposes to empower PFRDA to oversee pension funds and corporate and PSU superannuation schemes. It also proposes to allow FDI in pension fund management. There are two dissent notes attached to the standing committees report, one from Khagen Das, CPM MP from Tripura and another from Gurudas Dasgupta of CPI, a source said.

Both have, in principle, objected to the entry of foreign investors in the pension sector, said a source in the government. The Bill, as mooted by the government, has been endorsed by the panel, he added.

Ever since the provisional PFRDA was set up in 2003, it has been awaiting statutory status. A Bill for pension reform was introduced in 2005 but stalled due to opposition from the Left parties and lapsed in 2010. In March this year, the Cabinet cleared a new Bill and introduced it in the Budget session of Parliament, with some significant changes from the earlier one. The changes include tax treatment of the National Pension System (NPS) on par with other retirement products and separation of FDI cap fixation from the Bill (there is an understanding that FDI in pension fund mangers will be capped at the same level as in the insurance sector).

The development comes as a relief for the government rocked by a series of scandals amid a feeling of drift. Economic reforms, it is hoped, would give the much-needed boost to the economy and the general sense of governmental purpose.

The finance minister has been in regular touch with standing committee chairman Yashwant Sinha on the Goods and Services Tax Bill, and the banking regulation bill, said a top source in the finance ministry.

The New Pension System (NPS) was made mandatory for all new recruits to the government except armed forces with effect from January 1, 2004. The system was opened to all citizens from May 1, 2009 on a voluntary basis.