New Delhi, June 6: The government, which is being accused of policy paralysis, is dusting out its economic reform measures one by one.
The pension bill and the insurance amendment bill, stuck because of opposition from Congress allies, will be pushed again with mixed hopes that they will be cleared.
Top finance ministry officials said the Prime Minister wanted the Insurance Regulatory and Development Authority (IRDA) amendment bill to be introduced again with a proposal to increase the FDI cap to 49 per cent from 26 per cent. For this, the government needs to build a consensus with ally Trinamul Congress as well as Opposition party BJP, which had opposed the move when the bill was with the parliamentary committee.
The pension bill, which seeks to cap foreign investment at 26 per cent and ensure assured returns to investors, will also be revived. While the BJP supports the bill, sources in Trinamul Congress said the party remained opposed to the bill and “nothing has changed as far as we are concerned”.
Top officials point out that besides increasing the FDI cap, the IRDA amendment bill brings in reforms, which can catalyse the market such as allowing a trading floor (similar to stock trading floors) for insurance and the entry of foreign reinsurance players.
“We feel that this stubborn insistence on raising the cap can be given the go-by for the time being, allowing the rest of the amendments to go through… we can revive raising the cap when it is politically prudent,” officials said. “The government would be seen to be working with promises of more changes in the future.”
One of the clauses of the amended insurance act proposes to change the definition of foreign companies in India to allow the Lloyds of London to operate in the country.
Lloyds is an insurance and re-insurance trading market and not an insurance firm. It allows all insurance firms and clients to operate through registered brokers from its floor. Clients can get instant quotes from rival brokers representing various firms and decide on which products to buy and from whom. It also allows the firms to buy and sell reinsurance, reducing risks.
The amendment will also allow foreign reinsurance firms such as Swiss Re and Munich Re to enter India. Besides, the bill will give public sector non-life insurance companies freedom to raise capital by selling minority stakes on the condition that government holding cannot be brought down below 51 per cent.
The amendments can give the regulator more teeth. The IRDA, at present, doesn’t have specific powers. The proposed norms will allow the IRDA to decide insurance-related disputes with a provision of appeal to the securities appellate tribunal.