House panel defers decision on FDI cap in insurance

Barely 24 hours Parliament’s Standing Committee on Finance was scheduled to adopt its report on the Insurance Laws (amendment) Bill, the issue was again put on hold.

The move comes after the draft report was circulated among members — the penultimate step before discussing and adopting a report by the standing committee. The Bill proposes to increase Foreign Direct Investment (FDI) to 49 per cent from the existing level of 26 per cent. The parliamentary panel had scheduled a meeting tomorrow to adopt its report on the Bill, among other things.

Sources in the committee attributed the deferment to internal tussle among panel members, some of whom did not want the report to be adopted so soon, although the Bill is pending before the committee since September 2009. Adopting the report and placing it before the Parliament will give the government the freedom to act on the Bill.

The differences are so serious that CPI(M)’s Khagen Das, who is in hospital, called up members this morning and requested not to proceed with the report as it might lead to a “PAC-like” situation (showdown between members as it happened with the 2G probe report in the Public Accounts Committee). Panel chairman and BJP senior leader Yashwant Sinha also received similar requests from a few other members, according to sources.

The Insurance Act amendment bill was one of the eight items listed in the 2011-12 budget speech, where Finance Minister Pranab Mukherjee had promised that the issue would be solved before the budgetary year was out. However, the draft report of the panel has questioned the rationale for increasing the FDI cap in insurance from 26 to 49 per cent.

Though the committee was scheduled to discuss the report and pass it tomorrow, a letter circulated by the Lok Sabha secretariat this morning said the issue has been deferred indefinitely. The committee will, however, meet tomorrow to discuss other agenda. Recalling the then government’s assurance in 1999 on the floor of the House that the 26 per cent FDI cap will not be changed, the draft report has commented that it would be a “breach” of the existing policy if hiked.

The draft report has said the government has failed to successfully tap domestic finance to cater to the insurance sector. The government is not sure, the draft added, how much investment the insurance sector needs as two different figures on requirement of the sector were being quoted by two top officials.

While the Left leaders are totally opposed to the Insurance Bill, the BJP is a divided house. Its heavyweight leader Surinder Singh Ahluwalia is known to be opposed to passing the report. The Insurance Bill report has already missed two deadlines.

Members who are opposed to the proposed amendment said the government too has not given any indication to the committee that it wants to clear the way for the Insurance Bill soon.