Insurance, PFRDA, Companies bills get Cabinet approval

UPA Govt May Find It Difficult To Pass insurance and pension bills In Parliament As BJP Opposes

The UPA Government continued to display its commitment to reform agenda as the Cabinet today gave nod to two important financial sector reform bills, aimed at increasing foreign direct investment (FDI) in the insurance sector to 49 per cent from the current 26 per cent and opening up of the pension sector. Besides, the Cabinet approved the Companies Bill, 2011.

Those in know of the development said the Cabinet cleared 49 per cent FDI cap in the private insurers, but there was no clarity in FDI cap in the pension sector.

Still Cabinet Committee on Economic Affairs and Cabinet Committee on Infrastructure meetings were on and the formal briefing on the issue was to happen shortly.

Even as the Cabinet approved higher FDI cap in the insurance sector through amendments in Insuance Laws (Amendment) Bill and the Pension Fund Regulatory and Devlopment Authority (PFRDA) Bill, the government may not find it easy to pass these pieces of legislation in Parliament.

This is so, because the main opposition Bharatiya Janata Party (BJP) opposed the hike in FDI limit in the insurance sector and insisted that the bill be again brought to Parliament's standing committee on finance, which is headed by its senior leader Yashwant Sinha.

Parliament's standing committee on Finance had recommended retaining FDI cap in insurance sector to 26 per cent.

Earlier, the Cabinet had deferred even a diluted bill to retain existing FDI cap in insurance at 26 per cent with minor reforms in other parts of the sector. That time, then Finance Minister Pranab Mukherjee had remarked as to what is the hurry in pushing the bill when the cap is to remain at existing 26 per cent.

However, it agreed to help in passage of the Companies Bill. The Standing Committee twice vetted the bill, a rarity in the Parliamentary process in India.

PFRDA chairman Yogesh Agarwal said he will be happy with 26 per cent FDI in the pension sector. However, if it is to become 49 per cent in line with the insurance sector he will welcome the move even more.

He said lots of foreign interests were shown from the US and Europe in the pension sector in India.

Besides opening up the pension sector, PFRDA bill gives statutory powers to the interim regulator, constituted through an executive order in 2003.

FDI reforms measures, cleared by the Cabinet last month, were all executive decisions. However, the reform proposals cleared today are bills, which will require opposition's help to pass them.