Govt buckles on Pension Bill, dilutes key features

Having already succumbed to Opposition pressure on foreign direct investment in multi-brand retail, the UPA government has now given in to the BJP’s demand for key changes in the PFRDA Bill, 2011.

The flexibility shown this time, however, is to break the logjam over the proposed Bill, slated to be discussed in the Cabinet meeting on Tuesday but not taken up. The government has found a middle path to address the issues raised by the BJP. As suggested by Parliament’s standing committee on finance, it has decided to fix a 26 per cent FDI ceiling in the Bill itself.

The catch, however, is the proposed Bill will have a provision for automatically increasing the limit in case FDI in insurance is increased.

“It seeks to allow 26 per cent FDI or the limit allowed for the insurance sector, whichever is higher,” said a person familiar with the development.

The revised Bill may seek to give the option of a minimum guarantee to investors who are risk-averse. Every pension fund manager must then have a product guaranteeing minimum returns, such as government bonds. The Bill also seeks to facilitate easy withdrawals in certain emergency situations.