New Delhi, Oct 4 (PTI): The government on Thursday decided to move ahead with its proposal to increase the limit on foreign investment in the insurance sector to 49 per cent from the present 26 per cent, and also cleared a bill to amend forward trading in commodities, drawing sharp protests from Trinamool Congress chief Mamata Banerjee.
The Union Cabinet headed by Prime Minister Manmohan Singh cleared these and other reforms at a meeting today.
“The benefit of this amendment will go to the private sector insurance companies which require huge amount of capital and that capital will be facilitated with increase in FDI to 49 per cent,” Finance Minister P Chidambaram told reporters.
The Minister also clarified that state-run insurance companies will remain in the public sector.
Food minister KV Thomas, in a separate announcement, said the Cabinet has approved the Forward Contract Regulation Act (Amendment) Bill to give more powers to the Forward Markets Commission.
The Bill also seeks to facilitate entry of institutional investors and pave the way for introduction of new category of products such as options.
Now, the Insurance Laws (Amendment) Bill is likely to be taken up by Parliament for passage in the forthcoming Winter Session. The Bill, introduced in the Rajya Sabha in December 2008, proposes to increase the foreign direct investment (FDI) limit in the insurance sector to 49 per cent.
However, the Standing Committee on Finance in its report on the Bill had rejected the proposal to hike the FDI cap in the insurance sector to 49 per cent, saying this may not have the desired effect and could expose the economy to global vulnerability.
The panel, headed by senior Bharatiya Janata Party leader Yashwant Sinha, though had agreed with the need to bring in comprehensive changes in the archaic laws governing the insurance sector.
The Insurance sector was opened to private players in 2000 after the enactment of the Insurance Regulatory & Development Authority Act, 1999.
This Act permitted foreign shareholding in insurance companies to the extent of 26 per cent with an aim to provide better insurance coverage and to augment the flow of long-term resources for financing infrastructure.
The industry has been demanding for long to increase the FDI limit for adequate funds for expansion of the sector. IRDA Chairman J Hari Narayan recently favoured up to 49 per cent foreign investment in the sector.
West Bengal’s chief minister Mamata Banerjee, who has turned a bitter critic of the Congress-led United Progressive Alliance government, described as “immoral and unethical” the decision by the “minority” government at the Centre to increase the FDI limits in insurance and pension sectors, and called on all partners of the UPA to quit the government in protest.
“Today, yet another set of anti-people decisions of the Central Government have crossed the Laxman Rekha. These important decisions, which have direct bearing on the livelihood of millions of Indians, taken by a minority government, are immoral and unethical,” Mamata wrote on her Facebook page.
“Increase in FDI percentage from 26 to 49 in Insurance Sector and introducing 26% FDI in Pension Sector will make lifelong savings of individuals totally insecure,” she said. “Is it the intention of the UPA Government to sell out the country? We should unitedly oppose all such moves and will not allow the government to be bailed out after a series of such anti-people decisions,” the Trinamool Congress chief said.
Stating that the people of the country were watching the UPA government, she said, “I will also appeal to those supporting UPA to come out and oppose these moves in the greater interest of the people.
“Sarkar jaana jaroori hai, desh ko bachane ke liye,” she said.
Calling for moving a no-confidence motion against the government, Mamata said: “the minority government cannot play such immoral role. Let us move No- Confidence Motion. We have decided to meet the Hon'ble President on this issue.”