The United Progressive Alliance (UPA) government may be in a position to push for two insurance sector Bills — both of which represent critical reforms for the industry — to be passed in the last session of the 14th Lok Sabha, which may be convened on February 23.
To this end, Lok Sabha Speaker Somnath Chatterjee has directed the related standing committee to submit its report on the two Bills as early as possible. Parliament sources said Chatterjee had already sent the LIC Bill to the Parliamentary Standing Committee on Finance for “examination and report on or before the February 15, 2009”.
The Insurance Laws Bill, introduced in Rajya Sabha on the penultimate day of the last session, was referred to the same committee today with a request that the report be submitted “by the first day of the next session”.
Although the next session is slated to be a short one, summoned primarily to pass a Vote on Account, the UPA will be in a position to press for these contentious Bills to be passed if the standing committee submits its report according to the given schedule.
A standing committee is normally given three months to submit its report. “But the Speaker may ask the committee to submit its report earlier if the situation so demands,” said a senior source in Parliament. The standing committee, however, can ask for an extension.
The standing committee on finance is headed by Bharatiya Janata Party’s (BJP’s) Ananth Kumar. The BJP has so far not indicated its stand on the two Bills, but it will have to take a view on the matter in the standing committee.
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The Insurance Laws (Amendment) Bill, 2008 proposes to raise the Foreign Direct Investment (FDI) limit in insurance companies from 26 per cent to 49 per cent and permit foreign re-insurers to open branches in India. The LIC Bill proposes to enhance the government-owned insurer’s paid-up equity capital to Rs 100 crore from Rs 5 crore.
The Insurance Bill also proposes removing restrictions that requires Indian promoters to reduce their equity to 26 per cent within the tenth year of operations.
It will also permit public sector general insurance companies to raise capital from the market.
Insurance companies will also be allowed to raise capital from the market through newer instruments like preference shares, bonds and perpetual debt.
The Left parties, which withdrew support from the UPA government last July, have consistently opposed an increase in FDI in insurance.
They also fiercely opposed the introduction of the LIC Bill because they suspect the government of creating conditions for future disinvestment in LIC by raising its equity capital.