Shelve move to hike FDI, Left tells govt

Left parties yesterday asked the Manmohan Singh government to shelve the proposals to hike the foreign direct investment ceiling in the telecom and insurance sectors, saying it was "unwarranted and unjustifiable".

The Left might have its hands tied in supporting the United Progressive Alliance (UPA) government, but it did not stop its leaders from making public their "notes" given to the government during co-ordination meetings and throwing open the subject for "public debate".

Though the Cabinet can clear a proposal for hiking the FDI in the telecom sector, in case of insurance an amendment to the Insurance Development Regulation Authorities Act in Parliament will be needed.

Rejecting the arguments that the FDI hike in telecom would lead to improved teledensity and competition, CPI(M) senior Polit Bureau member Prakash Karat said there was no need to raise the sectoral cap in FDI by "overruling the grave security considerations" in the country.

Finance Minister P Chidamabaram had proposed to increase the FDI in the telecom sector to 74 per cent from 49 per cent and insurance to 49 per cent from 26 per cent.

The Left parties said the Indian security agencies had strong reservations on passing the management control of the telecom services companies in favour of foreign promoters.

"The Intelligence Bureau and the Directorate of Revenue Intelligence had (during the National Democratic Alliance regime) emphasised that the 49 per cent limit should be retained," he said, adding "if the security agencies objections were so clear a year earlier, why have they ceased to have validity within just a year."

On the insurance sector, Karat said the "unilateral" decision to further liberalise it was unjustifiable since financial liberalisation had not contributed positively to investment and economic growth. Moreover, countries that had embraced opening up of their financial sectors had experienced enhanced volatility and speculative attacks on their currency, he said.

About the civil aviation, Karat said the Left would take up the matter with the government separately. "The government should look into alternative options and not blindly follow the previous government's plan."

The CPI(M) leader, who was accompanied by D Raja of the CPI and Abani Roy of the RSP, said though the government had made certain modifications in the NDA government's proposals, the FDI hike from 40 per cent to 49 per cent in the sector "is not as damaging as that in telecom and insurance."

The Left parties decided to make public the notes on these issues, which they had submitted to the government and the UPA partners after it was learnt that the Centre was going ahead with the proposal on telecom.

Karat said the decision to step up debate on the FDI hike in telecom had come in the backdrop of the government circulating an official note for the Cabinet to take a decision.

Rejecting the argument that telecom companies needed huge investments for improving teledensity and putting up the necessary infrastructure, Karat said the growth in the sector in the country was much more rapid when the FDI was relatively low. He said none had thought it fit to explain why all the countries that had telecom growth far in excess of India's still maintained FDI restrictions.

"If they have been able to maintain such growths with FDI restrictions similar to India's, why is it imperative for us to lift these restrictions," he asked.

On insurance, he said the  size of the industry had remained the same and from this, the private firms were picking up the creamy sections in the metros, "eroding the ability of public sector insurers to cross subsidise their products in rural areas."