FCRA changes, cheap sale of pulses and edible oils get nod

After much delay, the Union cabinet today finally cleared the amendments to the Forward Contracts (Regulati-on) Act, giving more teeth to the commodities market regulator, the Forward Markets Commission, and opening the door for introduction of products such as options trading in the futures market.

It also approved Rs 884 crore for end-to-end computerisation of the Public Distribution System (PDS) in the country, to be implemented with state governments.

“The amendments (to the FCRA) would benefit various stakeholders, including farmers, to take the benefit of price discovery and price risk management and also enhance the public accountability of the regulator by providing for an appellate authority,” Finance Minister P Chidambaram said.

SOME CHANGES TO FCRA

• Definition of forward contract to include commodity derivatives and corporatisation, demutualisation and intermediaries
• Specific amendment proposed to allow trading in options in index and individual commodities
• FMC to have nine members from four now
• Give powers to the commission to levy fees on exchanges, members (intermediaries) and others
• FMC will be given an autonomous status; can investigate and levy penalties if Act is violated; SAT to be designated as appellate authority
• Commission will be given financial powers by creating a general fund
• FMC to get powers to appoint more officers and employees

The Bill had been kept off the cabinet agenda for a long while because of staunch opposition from the Trinamool Congress. With the party no longer part of the governing coalition, the amendments were cleared.

Shreekant Javalgekar, managing director and CEO of MCX, the country’s largest commodity exchange by volume, said the Bill, once approved by Parliament, would introduce new tools for hedging and price risk management. This would bring about better price discovery and create benchmark prices for commodities widely produced or consumed in India.

INSURANCE LAWS (AMENDMENT) Bill

• To raise foreign direct investment from 26% to 49% for private companies
• Provides for raising capital from markets by public sector general insurance firms and GIC
• Minimum capital requirement for health insurance set at Rs 50 cr against Rs 100 cr for general insurance companies
• Motor Vehicle Insurance and Compensation Legislation proposed for obligatory underwriting of third-party risk
• Irda empowered to take action against agents to protect policy-holders’ interests
• No policy would be questioned on grounds of misstatement after three years
• Provides for opening of branches only for reinsurance business by foreign reinsurers
• Appeal against Irda orders can be made to SAT
• Bill seeks to specify fine on intermediaries and insurance companies for misconduct of intermediaries and have provisions to deter multi-level marketing of insurance products

Separately, the cabinet extended and revised a scheme to supply pulses and edible oils at cheaper prices to families below the poverty line, through the PDS. Their prices have been rising over recent weeks. The central government would give a subsidy of Rs 20 a kg for distribution of pulses through the PDS; for edible oils, it will be Rs 15 a kg. Both schemes would be implemented through state governments.

AMENDMENTS TO PFRDA BILL

• Seeks to give statutory powers to interim pension regulator
• FDI ceiling capped at 26% or as approved for insurance sector, whichever is higher
• Membership of PFRDA to professionals having expertise in economics, finance or law only
• Option to subscribers to get minimum assured returns
• Interim regulator PFRDA set up through an executive order in 2003
• Lacks statutory backing since the Bill is in the limbo for long
• Earlier, Bill tabled in the Lok Sabha lapsed with dissolution of the 14th Lok Sabha in 2009
• Bill again tabled in 2011; it sought to keep FDI component out of purview of the legislation, but the new Bill specifies FDI after Parliament’s standing committee’s objection
• Seeks to establish a vibrant Pension Advisory Committee with representation from all major stakeholders

The Cabinet also extended an ongoing ban on export of edible oil, with the exception of 20,000 tonnes of branded edible oil in five-kg packages.