Though the revised pension reform bill is silent on the foreign direct investment cap, explicitly saying the level of foreign investment would be decided separately, the issue may be a problem in the renewed efforts at enactment.
At a meeting with finance ministry officials on Thursday, Parliament’s standing committee on finance asked them to specify the FDI cap in the pension sector.
After the issue of raising the FDI cap in private insurance to 49 per cent from the current 26 per cent got prolonged, the finance ministry revised the pension bill to keep a decision on foreign investment outside the ambit of the legislation. So, the decision can be taken by the executive without going for a Parliament nod.
The bill was first introduced in 2005 and a revised version was tabled earlier this year. The revised Pension Fund Regulatory and Development Authority (PFRDA) Bill says, “The foreign investment policy for pension sector intermediaries (including the pension funds and central recordkeeping agency) would be determined and notified outside the proposed legislation under the Foreign Exchange Management Act, 1999.” It is also silent on the FDI cap.
The standing committee members also asked ministry officials to specify provisions for the unorganised sector, on which the bill is silent. The members also wanted the government to specify an option to have guaranteed returns on invested funds, not elaborated in the bill. However, it may come in the rules to be framed by PFRDA.
“The representatives of the finance ministry will come back with the clarification in one week and then the next meeting will be called. We will have one more meeting with the officials, at best,” said a member of the committee.
Committee members believed the Bill would be cleared in one or two more sittings and then be presented to Parliament. The Bharatiya Janata Party — the chairman of the panel is from the party — has already said it would support the Bill in Parliament.
The bill is aimed at giving statutory powers to the interim pension regulator, PFRDA, to frame rules regarding pension funds. Right now, it does so only for the New Pension System (NPS). Unlike the old pension system, it may not have any assured returns.
NPS has already been operational for all central government employees who have joined service since January 1, 2004. Many state governments have also joined the scheme. The scheme has also been thrown open to all citizens, which means those in the unorganised sector can also have an old age safety net.