The long-pending legislation to raise the FDI limit in insurance could finally be cleared by Parliament after the principal opposition party, BJP, proposed capping voting rights at 26% in return for allowing foreign investors to hold an overall 49% stake.
On Saturday, Finance Minister P Chidambaram met BJP leaders — Sushma Swaraj, Arun Jaitley and Yashwant Sinha — to discuss the long delayed insurance and pension bills. Sources familiar with the matter said the finance minister told the BJP interlocutors that he would discuss the proposal to cap voting rights at 26% with the PM. “There should be some forward movement,” said a BJP leader. A senior finance ministry official familiar with the government’s thinking confirmed that the idea of capping voting rights at 26% had been put forward by the BJP leaders during Saturday’s meeting. He declined to discuss the government’s formal response.
While there have been no major differences between the two sides over the pension bill after the government agreed to explicitly stipulate a 26% cap on FDI in the legislation, BJP has so far been resisting increasing the quantum of FDI in the insurance sector to 49%. At the meeting, Sinha, the former finance minister, during whose tenure insurance was opened up to private investment in 2002, is learnt to have suggested the cap on voting rights. Sinha argued such a cap is in line with the banking companies’ amendment bill passed by Parliament, in which the voting rights for foreign investors in private banks is capped at 26%.
There is agreement between the two sides that the country needed large inward flows of foreign capital to overcome the present crisis in which the rupee has been plumbing to new depths. BJP’s support is crucial for the government for the passage of the two bills, which have been pending for around a decade. If BJP joins the Left in opposing the legislations, the government will find it difficult to ensure their passage in the Upper House. During UPA-I, the Left’s resistance had put both the bills on the backburner. An attempt to pass the Pension Regulatory and Development Authority Bill last year failed when Mamata Banerjee’s Trinamool Congress, UPA ally at that time, opposed it.
Source: The Economic Times