Two Bills introduced in Parliament on the insurance sector riled the Left parties so much that they came to blows with the government on the floor of the Rajya Sabha.
The Bill, introduced in the Rajya Sabha today, proposes to amend the Insurance Act, 1938, the Insurance Regulatory and Development Authority Act, 1999, and the General Insurance Business (Nationalisation) Act, 1972.
When the Bill was tabled, angry Left members stormed the well of the House and tried to snatch the copy of the Bill from Minister of State For Finance Pawan Bansal. External Affairs Minister Pranab Mukherjee had to stand protectively before the minister to prevent CPI(M) members from grabbing the papers.
In the Lok Sabha, the Left pressed for a division (voting) at the introduction of the Life Insurance Corporation (Amendment) Bill, which seeks to increase the equity base of the government-owned insurance company to Rs 100 crore.
The Bharatiya Janata Party did not join the fracas in either House but sought to divert attention by protesting against Minority Affairs Minister AR Antulay, indirectly helping the government table the Bills.
There is no chance of the Bills being passed in this session of Parliament and they were referred to the standing committee, where the Left parties can voice their opposition.
The Insurance Laws (Amendment) Bill, 2008, has been delayed for four years and represents a significant step forward in economic reform (see table). As long as the Left parties were supporting the government, the United Progressive Alliance (UPA) was unable to persuade them to permit this measure.
The day the Left withdrew support to the UPA on July 8, the then finance minister P Chidambaram had said the government would press ahead with the Bill.
The CPI (M), the largest of the Left parties, termed the move “criminal”.
“We had been able to insulate ourselves because we didn’t allow global speculative capital to do the damage. Now we are throwing open a crucial financial sector, insurance, to foreign capital. Global financial institutions are facing shortage of capital for their survival,” said Sitaram Yechury, CPI(M) leader in the Rajya Sabha.
“The government is planning to hand over additional 23 per cent of Indian capital to these companies. Using the hard-earned money of common Indians, the UPA government wants to bail out foreign companies. This is a criminal act and totally unacceptable,” he added.
Inside the Lok Sabha, where the Left parties were determined to oppose the LIC Bill, Home Minister P Chidambaram pleaded with CPI(M) member Hannan Mollah before the House was reconvened at 12 noon: “I can understand you have ideological objection to the Insurance Bill in the Rajya Sabha. But why are you opposing the LIC Bills?” he asked.
Mollah replied, “This is the stepping stone for future disinvestment of LIC. You know well that this Bill can’t be passed during the current Lok Sabha session. But you have brought the Bill nevertheless, to send a message to your masters.”
Yechury alleged that the UPA had taken the same route earlier by introducing an innocuous Bill to raise the equity of a public sector company and then divested its shares.
“In the same way, the government wants to hand over half of LIC’s investible fund of Rs 6.5 lakh crore to foreign or private players,” he alleged.
On the Bill introduced in the Rajya Sabha, TR Ramachandran, CEO & MD, Aviva India, said, “A simple calculation shows that raising the foreign direct investment (FDI) limit to 49 per cent may increase the total FDI in the life insurance industry by almost 2.5 times from the current level of approximately Rs 2,500 crore.”
He added this would also help the insurance sector expand, launch innovative distribution channels, upgrade technology, enhance the current product portfolio and bring in global best practices. The Bill seeks to fulfil a key demand of public sector general insurance firms — permission to tap the equity market like public sector banks.
Promoters of Indian insurance companies can also hope to get some relief on the clause prescribing mandatory listing after 10 years. Removing the restriction will enable many cash-rich Indian promoters to stay on as majority shareholders in life insurance ventures, says an insurance industry expert.
