Govt to consider panel's proposal on FDI in pension

The government would carefully consider the proposals of the parliamentary standing committee to allow Foreign Direct Investment (FDI) in the pension sector, to be modelled on the insurance sector.

"I have before me recommendations of the standing committee, which says the proportion of FDI that may be allowed in pension fund sector should be the same as in the insurance sector. The recommendations will be carefully considered," Finance Minister P Chidambaram said in the Rajya Sabha.

He was replying to a question raised by the CPI(M) MPs during question hour.

At present, the FDI limit in the insurance sector is limited to 26 per cent, though there is a proposal to raise it to 49 per cent, for which the Insurance Regulatory and Development Authority (IRDA) Act needs to be amended.

The finance minister assured the members that no law would be imposed before a full-fledged discussion on the recommendations of the standing committee of finance relating to pension fund by both the Houses.

"I will also discuss this outside the House. All viewpoints will be considered," the minister said. Chidambaram allayed fears of an adverse effect of investment of pension funds in the capital markets, saying the proposed PFRDA would regulate the fund.

The minister assured CPI(M)'s A Vijayaraghavan that the note of dissent in the standing committee would also be considered.

The government's decision to seek FDI for the pension sector is likely to spur the Left to make its objections to the PFRDA Bill and FDI in the sector stronger.

However, the FM's announcement today will make it all the more difficult for the Left and the government to bridge their differences over economic policy, especially regarding Bharat Heavy Industries Ltd (BHEL), which has kept the Left out of the coordination committee mechanism.