TMC files dissent, opposes raising FDI cap in insurance sector

Trinamool Congress has filed a strong dissent note against the proposed increase in FDI cap in the insurance sector even as a Parliamentary panel report is believed to have endorsed raising the foreign investment limit.

The Mamata Banerjee-led party in the dissent note said portfolio investments can be liquidated and repatriated quickly.

Trinamool Congress MP Derek O'Brien, who was a part of 15-member select committee that went into the Insurance Amendment Bill, filed a dissent note opposing clause 3 of the Bill that seeks to raise foreign investment limit to 49 per cent from the current 26 per cent while also allowing for portfolio investments.

While the committee is believed to have endorsed the government's Bill, Derek O'Brien in the dissent note said: "Higher FDI cap will only result in Indian entities liquidating their stake, at several times their original investment, without any fresh investments coming in."

The Bill, he said, "creates no safeguards to ensure that the additional capital will be used to improve insurance penetration in rural areas."

The TMC leader said since 2000, only Rs 7,818 crore has come in as FDI in insurance sector. LIC's contribution as dividend to government alone was Rs 1,400 crore last year and over a 10-year period the figure could be Rs 10,000 to 14,000 crore.

"Portfolio investments can be liquidated and repatriated very quickly. They can cause serious instability in the economy," he said.

Along with foreign capital, there would be import of practices that could cause serious loss to the Indian middle classes by inviting them to invest in high risk plans, he said.

The note also said that insurance penetration has improved by hardly 1 per cent from 2.71 per cent in 2001 to 3.9 per cent in 2013. Insurance penetration has in fact been falling steadily from 2009.

"The Ministry of Finance has admitted that there is no direct correlation between FDI and insurance penetration," he said.