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A day after the winter session of Parliament had to be adjourned sine die without any crucial Bill being passed because of a disruptive Opposition, the Centre on Wednesday approved ordinances to raise the cap on foreign equity in private insurers and start e-auctions of coal blocks.
The Union Cabinet approved the promulgation of the Insurance Laws (Amendment) Bill to raise the cap to 49 per cent from 26 per cent and re-promulgation of the Coal Mines (Special Provisions) Bill, 2014. It approved another ordinance to regularise e-rickshaws, a scoring point for the Bharatiya Janata Party against the Aam Aadmi Party, ahead of elections to the Delhi Assembly expected early next year. It also allowed foreign direct investment (FDI) without any ceiling in the medical devices market, to help boost manufacturing in the country. The Narendra Modi government expects the insurance law to bring $6-8 billion into the country in a few years, while the coal law would help state governments earn Rs 7 lakh-crore from the auction of 204 coal mines over 30 years.
A dissent note to the select committee recommendations on the insurance Bill had said promoters would dilute their equity instead of raising fresh one, defeating the purpose of trying to increase the capital base. The recommendations are the basis of the ordinance.
A source said the ordinance would leave it to the board of the company to decide on whether to dilute or raise equity, but the basic intent of the ordinance was to infuse capital and increase the solvency of Indian shareholders.
While the ordinance will allow Indian companies to cut their stakes, the exact conditions will be laid in the rules later. "However, there will not be many conditions," the source said. Reliance Capital, which has interests in financial services including insurance, is considering a long-term pact with a foreign partner to allot a minority stake via preferential allotment, that is, dilute its equity. The announcement is expected on Thursday.In a signal to both the Opposition and foreign investors, Finance Minister Arun Jaitley said on Wednesday, "It [the ordinance] announces to the rest of the world, including investors, that this country can no longer wait even if one of the Houses of Parliament waits indefinitely to take up its agenda."
The Opposition slammed the government for clearing laws through ordinances. In a letter to President Pranab Mukherjee on Wednesday, Communist Party of India (Marxist) leader Sitaram Yechury said: "I am sincerely requesting you not to sanction such ordinances."
Besides, the ordinance route may make foreign investors wary, too.
Amitabh Chaudhry, managing director and chief executive, HDFC Life, said companies would wait for the fine print of the ordinance before any bringing foreign investment. "It is not clarified what will happen if any FDI or FII [foreign institutional investment] comes in during this period and the ordinance lapses. What will be the status of this investment?"
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On insurance
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Associated Chambers of Commerce and Industry of India President Rana Kapoor said it would have been much better and more convincing for the investors if political consensus was reached on the reforms and the insurance Bill.
While the ordinance allows both FDI and FII, none of the insurers are listed. "Hardly any foreign institutional investors will come in this space, as very few companies are likely to go public in the near future," said the source. Jaitley said the ordinance demonstrates the government's firm commitment and determination on reforms. Next month, US President Barack Obama will come as the chief guest on the Republic Day.
The insurance Bill could not be tabled in the Rajya Sabha, after whose clearance it was to go to the Lok Sabha; the coal mines Bill was cleared by the lower House.
In line with the provisions of Coal Mines (Special Provisions) Ordinance, 2014 and subsequent Rules, the coal ministry will begin the first batch of e-auctions for 24 mines from Thursday. Coal Secretary Anil Swarup said of the 24, seven were for power companies, 16 for other end-use plants of iron and steel producers, cement makers and captive power producers (CPPs) and one for steel makers (coking coal); two mines each - four in total - would be auctioned together.Mines set aside for iron & steel and cement makers and CPPs will be given through 'ascending forward auctions', in which qualified bidders will quote incremental bids above the pre-determined floor price. Mines to be allocated for power companies will be given through 'descending reverse auctions' to minimise the impact on power tariffs for end-use plants. The deadline for receiving technical bids is January 31. In October, the Centre approved promulgation of a special ordinance for re-allocating coal blocks cancelled by the Supreme Court in its September judgment.
An ordinance has to be replaced by a Bill in six weeks of the start of a Parliament session, otherwise it lapses. When asked whether the government planned a joint session to clear the coal Bill, Jaitley said the query "had the answer" contained in it.
On 100 per cent FDI in medical devices business, Jaitley said a new sub-category had been carved out in the pharmaceutical sector, in which 100 per cent FDI is that already permitted.
"In this age of super-specialisation, if medicines and pharma are one aspect, in which India has attained a certain amount of core competence, we still have not achieved that in medical devices, particularly, which are to be installed in human body for the purpose of treatment," he said.
Medical devices include instrument, apparatus, appliance, implant, material or other article.
