PM faces early resistance in insurance reform push

Govt's move to bring the Bill in Rajya Sabha has been blocked by opposition

Plans by the government to allow more foreign investment in India's still-small insurance sector has hit snags in Parliament, testing Prime Minister Narendra Modi's campaign promise to push through reforms to revive the economy.

Over the past week, the government has twice sought to introduce legislation in the upper house of Parliament permitting 49% foreign participation in an insurance venture, up from 26%, but it has been blocked by the opposition.

Finance Minister Arun Jaitley has called the heads of political parties to a meeting on Wednesday in a bid to form a consensus behind the legislation so billions of dollars can flow into a sector starved of funds and held back by over-regulation.

Modi's government expects that if the sector is opened further, insurers such as Canada's Sun Life Financial Inc, Prudential PLC Nippon Life Insurance Co, Italy's Generali and Dutch insurer Aegon NV will inject more funds into what is the world's 10th biggest life insurance market - even though currently fewer than 4% of Indians have insurance.

Jaitley needs the support of the opposition in the 250-member upper house of parliament where his Bharatiya Janata Party (BJP) and its allies have about 60 members.

The ruling group faces no problem winning approval from the lower house, where it has a comfortable majority after an election in May.

But the upper house is the stumbling block. Its next elections - when one-third of its members retire - are not due until 2016.

ANOTHER OPTION AVAILABLE

If the government continues to be stymied it has an option - rarely used - to hold a joint session of parliament and deploy its huge majority in the lower house to push through the insruance bill. A previous BJP government used a joint session once to get through a tough anti-terrrorism law, citing national security.

But the BJP would rather get the upper house on board.

"We are going to bring the bill for discussion in this session," Commerce and Industry Minister Nirmala Sitharaman told Reuters, suggesting the government was prepared for a showdown over its first, modest stab at reform since Modi took office in May.

In 2000, when the BJP led the government, India opened its insurance sector to private and foreign ownership. Since then, most top international insurers have entered.

In 2008, the government - then led by Congress party - proposed changing ownership laws to allow 49% foreign participation in insurance ventures, but it could not win parliament approval.

Liberalising investment rules "will bring a lot of capital into an investment-starved sector whose growth is good for the economy," Jaitley said.

'INTERNAL CONSULTATIONS'

The Congress, thrashed by the BJP in this year's lower house elections, hasn't declared opposition to the insurance bill.

"There is no final yes or no on this," said Randeep Singh Surjewala, a senior member of Congress, which has 69 members in the upper house. "We are in the midst of internal consultations. We are pro-investment, but we want the interests of all stake-holders to be protected."

Tens of thousands of employees at state-controlled insurance companies and their communist party backers are strongly opposed to foreign involvement in the insurance sector, saying it would give them control over domestic savings and was against the national interest.

Even a trade union affiliated to the ruling BJP criticised the measure to open up the insurance sector.

"Trade unions are strongly opposed to the hike in the foreign investment limit as it would lead to outflow of people's savings," said Vrijesh Upadhyay, general secretary at Bharatiya Mazdoor Sangh, India's biggest trade union.