Chidambaram takes half a step to the left

With the Left going hammer and sickle after the government over the matter of foreign direct investment (FDI), the government is sending signals to the communists that it is prepared to meet them halfway on all issues.

At his lunch and dinner meetings with senior Left leaders on Wednesday, Finance Minister P Chidambaram sought their support on raising the foreign investment cap in the insurance business from 26 per cent to 49 per cent.

He argued that the sector, being a capital intensive business, required regular fund infusion into companies to enable them to comply with solvency requirements.

However, the finance minister allayed the Left leaders' fears about the Life Insurance Corporation (LIC) and the General Insurance Corporation (GIC) and said FDI would not be allowed in the public sector.

As per the Insurance Regulatory and Development Authority rules, an insurance underwriters' equity base should be at least 1.5 times the sum assured by them.

With some Indian partners in the 74:26 joint ventures unable to put in adequate funds, the capital infused by the foreign players will be used to bolster the solvency ratios of the private companies.

The government has also decided to formally announce the composition of the board for the reconstruction of PSUs at the meeting of the Union cabinet slated for 29 September.

The government, in keeping with the Left's demands, has decided to have experts and retired heads of well-run PSUs and banking institutions on the board. The Left was assured that there would be no political appointees on the board.

On the telecom FDI front, the finance minister is set to respond in writing in a day or two to the Left parties on their 'note' on telecom.

While the government has already prepared cabinet papers on the proposal, top sources revealed that it would be excluded from the cabinet's agenda on 29 September.

When asked whether the finance minister seemed amenable to the Left's demands on the issue, CPM politburo member Prakash Karat said, "We will be able to say that only after we receive his reply."

On the proposal to have only have Indian citizens on the board of telecom ventures or on the department of telecom's suggestion to give the minority Indian stakeholder 50 per cent representation on the company's board, the Left's postures at the moment are ambiguous.

While AB Bardhan said these proposals were being deliberated, Karat said that they didn't amount to much since the control of the telecom company would still be in foreign hands.

Karat said that a final decision would be reached after the finance minister's reply was discussed at the next UPA-Left coordination meeting.

Any rude shocks on the telecom front have, however, been cushioned with the finance minister making it clear to the Left that he was "not a disinvestment minister".

On the issue of FDI in civil aviation, the government once again reassured the Left that only private domestic airlines would come under the FDI ambit.

FDI in these companies will be allowed to the extent of 49 per cent from the existing 40 per cent. He stated Air-India and Indian Airlines would not be touched.

The Cabinet meeting on September 29 will also clear the proposal for setting up a commission for the unorganised sector. The commission for women will be reconstituted and its head, Poornima Advani, who was appointed by the previous NDA government, is likely to be replaced.