The finance ministry will again prepare a draft Cabinet note on raising the cap on foreign direct investment (FDI) in private insurance companies to 49 per cent from 26 per cent at present. The note will be sent to the ministries concerned, and a final note will be prepared only after their feedback, officials said, adding the entire process could take a couple of months.
However, the bigger issue here is that the United Progressive Alliance’s (UPA) ally, Trinamool Congress, is not ready to toe the ministry’s line on the issue.
Even a diluted version of the insurance Bill — which proposed retaining FDI cap at the existing 26 per cent and tweaking certain minor provisions — was deferred at the Cabinet meeting on May 10. Following this, the finance ministry under Pranab Mukherjee wrote to the Cabinet secretariat to take up the matter again with a changed clause that FDI cap would be raised to 49 per cent.
After P Chidambaram took over as the finance minister, the draft note was again asked from the Cabinet secretariat to the ministry to seek his approval. The finance minister cleared the file yesterday. This means the draft Cabinet note will be prepared again, said officials.
Meanwhile, Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee today said she remained strongly opposed to FDI in insurance as well as other key sectors like multi-brand retail and aviation.
On May 10, then finance minister Pranab Mukherjee had announced that the Bill be deferred after the Cabinet secretary put the Bill on the table of the Cabinet meeting. Later, the members of the Cabinet said there was no point in discussing a Bill that proposed little or no change in the existing scheme of things in the insurance sector.
Earlier, the government’s proposal to raise FDI limit in the insurance sector did not find favour with the Parliament’s standing committee, headed by former finance minister and Bharatiya Janata Party (BJP) leader Yashwant Sinha. The committee recommended that the cap be retained at 26 per cent.
The increase in FDI cap was proposed by Chidambaram in his first Budget in the UPA-I in 2004. However, the Bill could not be tabled in Parliament because the Left parties, which supported the ruling coalition at that time, were opposed to it.
So far as the Pension Fund Regulatory and Development Authority (PFRDA) Bill is concerned, a clause will be inserted in the Bill that FDI cap of 26 per cent or in line with the insurance sector, whichever is higher, be allowed in the pension sector.
Earlier, The Bill had sought to keep the decision on FDI cap out of the purview of the legislation. However, this did not find favour with the standing committee, which wanted the FDI to come in the legislation only.
