Six-year wait ends for up to 49% FDI in insurance

Rajya Sabha clears the Bill after Congress comes on board

The logjam over the legislative route to economic reforms appears to have been resolved, with the National Democratic Alliance (NDA) government getting a green signal for the insurance Bill, 2015, from the Rajya Sabha. The Bill was passed by voice vote in the Upper House late on Thursday evening.

The Bill, already passed by the Lok Sabha, seeks to increase the cap on foreign direct investment (FDI) in the insurance sector from 26 to 49 per cent.

On Thursday, the government managed to bring the Congress on board in the matter, amid opposition from the Trinamool Congress and the Left parties. Sources say the government told the Congress as the 2008 insurance Bill had been brought in by the United Progressive Alliance regime, it was the "UPA's baby". The Congress also agreed to a seven-day deadline given to a Rajya Sabha select committee to consider the Mines and Minerals (Development and Regulation) Act. In return, Raj Babbar from the Congress is set to be elected unopposed to the Rajya Sabha from Uttarakhand. The seat was left vacant, following the death of Congress member Manorama Sharma.

On Thursday, the insurance Bill was passed with the support of Opposition parties such as the Congress, the All India Anna Dravida Munnetra Kazhagam and the Nationalist Congress Party, besides allies such as the Shiv Sena and the Shiromani Akali Dal. Several parties, such as the Trinamool Congress, the Dravida Munnetra Kazhagam, the Samajwadi Party and the Bahujan Samaj Party, however, walked out.

The Left parties insisted on a vote on their two amendments to the Bill, which were defeated. These parties and the Samajwadi Party demanded the 2008 Bill, pending before the House and sent to a select committee, be withdrawn.

The Bill has had a tumultuous journey through the past six years, initially being sent to a standing committee under the UPA regime, when 88 amendments were introduced but no headway made amid stiff Opposition from the Bharatiya Janata Party (BJP).

But with a change of government at the Centre, the BJP changed its stance and sent the Bill to a select committee of the Upper House. BJP MP Chandan Mitra was the chairman of the panel.

Both Mitra and Jayant Sinha, minister of state for finance, said the Bill would increase insurance penetration in rural areas.

Of the estimated Rs 44,500 crore required in the insurance sector through the next five years, Rs 21,805 crore is expected to be through FDI flows.

Mitra has said the Bill will also open the reinsurance market and help bring health insurance to a larger section.

Supporting the Bill, the Congress's Rajeev Gowda said it was the UPA's brainchild. He, however, added the BJP had taken a U-turn on the Bill.

"We don't take U-turns. Think of the tragedy: This Bill could have been passed in 2008 if they (the NDA) had been on board!"

A LONG JOURNEY

• 2004: Then finance minister P Chidambaram proposes to raise FDI cap in private insurers from 26% to 49% in the first Budget of UPA-I
   
• 2008: UPA-I tables the Insurance Laws (Amendment) Bill to this effect
   
• 2011: Standing committee on finance, headed by former finance minister Yashwant Sinha, recommends against raising FDI cap from 26%
   
• 2012: Cabinet clears a revised Bill to raise FDI cap to 49%
   
• 2014: Bill is referred to a select committee, headed by BJP MP Chandan Mitra
   
• 2015: Cabinet approves amendments in line with select committee recommendations
   
• 2015: Ordinance issued to this effect, as Parliament isn't in session
   
• 2015: Old Bill withdrawn in RS; new Bill passed