New Delhi, July 5: The Congress-led UPA government plans to cap foreign investment in private pension funds at 26 per cent. This will be done through the pension regulatory authority bill, which is slated to be introduced in the coming monsoon session of Parliament.
The original draft of the bill was silent on the foreign direct investment (FDI) limit in the pension sector and the power to set the FDI cap was, in effect, given to the pension regulator.
In order to evolve a political consensus on pension reforms, the bill ' which was sent to a parliamentary standing committee ' has been reworked and the government now wants to clearly specify the FDI limit in this sector.
However, the Left, already in the middle of a row with the government over stake sale in Bhel and the signing of a defence co-operation pact with the US, has decided to up the ante by opposing any FDI in pension.
The Left is also against granting the pension regulator powers to take policy decisions bypassing the legislature.
“We (the Left) will oppose the pension regulatory authority bill in Parliament. I have given a dissenting note to the standing committee vetting the bill,” said Gurudas Dasgupta, CPI leader and member of the standing committee on finance.
Dasgupta and Rup Chand Pal, CPM member in the Lower House, are in the committee, which has been vetting the bill. Both intend to give dissenting notes as does the DMK representative.
“We not only do not agree with the standing committee’s view on the bill, but are alarmed by the manner in which the finance ministry has tried to get the bill processed,” said Dasgupta.
Dasgupta’s dissent note expresses the fear that by allowing pension contributions to be parked in the stock market, the collective savings could well be frittered away. The Left leader points out that the Indian pension model is derived from an earlier Chilean experience which had failed, with pension fund managers finding it difficult to pay employees even the principal.
But the real dissent is on the FDI clause. The Left feels that transnational pension funds would siphon off savings from local arms to offshore funds, unless adequate safeguards are built in.
Dasgupta also opposes the way in which the government is seeking to transfer the power to legislate on policy issues to the new regulator.
Section 14 of the bill states the new regulator will lay down “norms for the management of the corpus of the pension funds, including investment guidelines”.
This in effect means that unlike the Insurance Regulatory Development Act, this bill does not specify whether and how much of the corpus needs to be invested within the country.
Similarly, Section 13 of the bill states that the pension fund regulator’s ambit will not be limited to just the new pension scheme of the government but will cover “any other pension scheme not regulated by any other enactment”. In effect, this means that the sector is being thrown open through the bill without formally stating it.