Retail FDI victory fuels govt's reforms push

The government is preparing to push through at least three pieces of key economic legislation in the winter session of Parliament, after securing votes for foreign direct investment (FDI) in multi-brand retailing.

It has put aside the insurance Bill to raise the FDI cap in the sector from 26 to 49 per cent, as it would mean sending it back to the standing committee, which recommended retaining the cap at 26 per cent. Finance Minister P Chidambaram discussed the issue with senior leaders of the Bharatiya Janata Party (BJP) a few days ago and appears to have virtually decided to put contentious issues aside.

But the government wants to use the FDI victory impetus to clear the Companies Bill and those amending the banking and pension Acts. The session has about six working days left.

The Banking Regulation Amendment Bill, critical for the government’s plan to expedite the process of providing new banking licenses, could be moved as early as Monday.

Parliamentary assent to the Bill will enable the Reserve Bank of India (RBI) to curb misuse of banks by companies.

The Bill will remove the 10 per cent voting rights limit in private sector banks, and increase the cap from 1 per cent to 10 per cent in public sector banks.

RBI will have powers to impose penal interest on banks that fail to meet their required cash reserve ratio.

The Companies Bill is also likely to be passed in this session, with BJP leaders indicating they will help the government in clearing it.

The Forward Contracts Regulation Act (Amendment) Bill is another legislation the government has lined up for passage in the session.

Other important non-financial businesses include the Lok Pal Bill and several long-pending education Bills.

Outside Parliament, the government machinery is preparing to capitalise on the positive sentiment created by the retail FDI victory.

Rail rate increases and a tough Budget are in the offing, a senior source in the Prime Minister’s Office said.

“The fiscal situation is not good and there isn’t too much choice,” he said, adding the 2012-13 Budget was expected to be a practical one, to ensure there is enough outlay to continue financing the flagship schemes.

Defence Minister A K Antony had expressed some fear on the defence outlay staying where it is.

The government will push through infrastructure proposals and the constitution of National Investment Board will be a step in this direction, added the official.