New Delhi, July 13: The Congress-led government is perturbed over the threat of the budget proposal to raise the foreign investment limit in insurance being scuttled in the face of opposition from both its ally, the Left, and its rival, the BJP.
Finance minister P. Chidambaram wants to raise the ceiling from 26 to 49 per cent but, unlike other budget initiatives, this one needs an amendment to a law passed by Parliament, the Insurance Regulatory and Development Authority Act.
Sources said the Centre is aware that the BJP, which in government had tried to do the same thing, might vote against the bill.
The Left has issued a similar threat. Although the Left would not wish to play into the hands of the BJP, it is as difficult for it to go back on a long-standing policy of opposing such an increase.
If the government moves an amendment to the act, it will be treated as a money bill. In that case, a defeat on the floor of the House will mean the government having to resign.
Sources said Prime Minister Manmohan Singh might step in to settle the differences with the Left. The Left has had meetings with Sonia Gandhi and she has given the signal to start a serious dialogue with it.
Till now, the Congress was worried but not overtly concerned about the Left’s opposition to the increase in foreign investment ceilings in insurance, telecom and aviation. Initially, the Left’s stand was treated in the same way as its resistance to airport privatisation and demand for a higher interest rate on provident fund — mainly sound and fury.
But now the government has realised that the threat is more serious and will need tending to with more than placatory words. Some hard bargaining is on the cards whereby the Congress may concede something to the Left to enable it to save face with its support base.
Until this morning, the BJP was a divided house, with one section pointing out that in government the party had initiated the same measure. But the majority is coming round to the view that it would be bad politics to let an opportunity to embarrass the government pass.
In any case, there have always been sharp divisions in the party over foreign investment and it is not as if hardliners have not won in the past.
Singh has two options — a full or partial rollback along with promises to take into account the Left’s views before making policy announcements in the future, or stall by starting talks and pushing back introduction of the bill.
There is a third, and risky, alternative. The government could gamble on the Left not going to the extent of voting out of power a regime it supports or on the BJP deciding to support a move its own government in the past had conceived.