Centre seeks consensus on FDI in insurance

The government has decided to wait for a consensus on hiking the foreign investment limit in the insurance sector to 49 per cent before acting on the Budget announcement.

The move follows reservations expressed by certain ministries regarding the reputation of some foreign players that have set up joint ventures in India.

Finance ministry officials said the United Progressive Alliance government was trying to first build a consensus with the Left parties, which were opposing the move.

They also said the government would not immediately rewrite the Insurance Act, 1938, as was planned earlier. "If there is a political consensus on the issue, we will merely amend the law and then take up the issue of a new legislation," an official said.

The government had in the Budget for 2004-05 announced its intention to raise the foreign investment limit in the insurance, telecom and civil aviation sectors.

The issue of hiking the foreign direct investment (FDI) cap in telecom is already under the lens on account of management control and security concerns.

The arguments being put forth against permitting higher FDI limits in the insurance sector includes the implications for resource mobilisation, as public sector companies invest heavily in infrastructure projects.

In case of the Life Insurance Corporation of India, which manages assets of over Rs 3,00,000 crore, over 85 per cent of the investments are in government paper. A section in the government also feels some foreign partners in Indian joint ventures are reinsuring with their international parents.