After FDI reforms, the UPA Government is likely to take up a slew of big ticket reform bills in its Cabinet meeting slated for tomorrow, with Trinamool Congress (TMC) out of the ruling coalition. These bills relate to hiking FDI cap in private insurance companies from 26% to 49%, Companies Bill, giving statutory power to interim pension regulator and more teeth to forwards market watchdog.
The cabinet is also expected to discuss the final draft of the 12th five-year plan, following which it will be placed before a meeting of the National Development Council (NDC) tentatively scheduled for later this month. It is also likely to clear the proposed creation of National Investment Board (NIB) to be headed by the Prime Minister for clearing mega-projects. The NIB was mooted by Finance Minster P Chidambaram at the full Planning Commission meeting last month.
After dithering on FDI hike in insurance sector for quite long, the government has made up its mind to deliberate on the bill in the Cabinet tomorrow, those in know of the development said.
In fact, insurance sector regulator IRDA today batted for increasing FDI cap in insurance sector to 49% as the sector requires greater investment for growth.
"Absolutely (I am in favour of 49%). I do think unless we go for 49% we will not have the kind of capital required to underpin the growth of insurance industry," Insurance Regulatory and Development Authority (IRDA) Chairman J Hari Narayan said on the sidelines of a CII event here.
He said this sector requires lot of money. "Look at it, in banks it is 74%, in Asset Management Company they are 100%, I do not see why insurance companies it should be 26%. We should increase that," he said.
Earlier, the Cabinet had deferred even a diluted bill to retain existing FDI cap in insurance at 26% 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%.
Parliament's standing committee on Finance had recommended retaining FDI cap in insurance sector to 26%.
As such, it might not be easy for the government to get the bill passed, at least in the Rajya Sabha where the ruling coalition does not have a majority. Recognising this, Human Resources Development Minister Kapil Sibal recently said that the ruling coalition will persuade the opposition to support the bill.
Together with insurance bill, the Cabinet will also deliberate on the Pension Fund Regulatory and Development Authority (PFRDA) Bill. The bill seeks to give statutory power to interim pension regulator PFRDA.
To buy peace with the opposition, the government had earlier agreed to specify FDI component in the bill itself. However, the bill, brought to the Cabinet earlier, said that the FDI cap will be 26% or in line with the insurance sector, whichever is higher. This means that if FDI cap in insurance sector is hiked to 49%, pension sector will also have that much FDI limit.
The main opposition BJP had earlier agreed to support the bill, but the UPA's then ally--TMC-- had opposed it.
TMC had also not allowed deliberation on the Forward Contract (Regulation) Amendment Bill, even though the bill was listed in the agenda of the cabinet a number of times. The bill aims at giving more power to the Forward Markets Commission and introducing more products such as options and indices.
TMC had opposed the bill on grounds that it would help big traders and not small and marginal farmers as well as small traders.
On Comapnies Bill, Parliament's standing committee on finance recently recommended making corporate social responsibility (CSR) spending mandatory for companies having a networth of at least Rs 500 crore or turnover of at least Rs 1,000 crore or a net profit of Rs 5 crore in any financial year. The earlier bill prescribed that these companies try to spend at least two% of average net profit in the preceding three years on CSR every financial year.
The standing committee also wanted the government to clearly define the term ‘private placement’ of instruments to raise money.
FDI reforms measures, cleared by the Cabinet last month, were all executive decisions. However, the reform measures listed for tomorrow are bills, which will require opposition's help to pass them, at least in the Rajya Sabha. Given the collision course between the UPA government and the opposition, it would be interesting to see how these bills will require majority support in the upper house, analysts said.
But tabling of the bill in the winters session of Parliament will show commitment of the UPA government to reforms, they added.