Congress MPs in House Panel Oppose Hike In Insurance FDI.

The government is unlikely to push for a hike in the foreign direct investment ceiling in the insurance sector to 49 per cent from 26 per cent now due to a lack of political consensus and instead focus on fast tracking tax reforms.

According to sources in the Parliamentary Standing Committee on Finance, it could take another year or so before it finalises its views on the Insurance Laws (Amendment) Bill, 2008. The current Act caps the FDI at 26 per cent and the Bill proposes to hike the limit to 49 per cent.

“The Parliamentary panel is divided on the issue of increasing FDI in the sector. While a draft report was prepared in July, there was a lot of divergence amongst members across political parties and it could not be finalised,” a person close to the development told The Indian Express.

While standing committee members belonging to the Left parties have always opposed the move, sources said some members belonging to the Bharatiya Janata Party as well as the ruling Congress party have reservations over the Bill. “Many members have pointed out that the only reason India did not suffer as much as other economies was because its financial sector is still quite insulated,” the person said.

With the logjam continuing for well over a year and a half, the Parliamentary panel is grappling with a number of other Bills, including the Direct Taxes Code Bill, the Constitutional Amendment Bill for Goods and Services Tax, Banking Laws (Amendment) Bill, National Identification Authority of India Bill and Regulation of Factor Bill.

“The panel’s workload is huge and its priorities are the Direct Taxes Code Bill and the Constitutional Amendment Bill for Goods and Service Tax. So the Insurance Bill, on which there is not much consensus within the panel, will have to wait,” said another person familiar with the development, adding that it could take as much as a year for the committee to submit its report.

This, however, does not mean that the government will go slow on other key financial sector reforms in areas such as pensions and banking. While the standing committee submitted its report on the Pension Fund Regulatory and Development Bill earlier this week, it is expected to finalise its views on the Banking Laws Amendment Bill during the current session. The Bill seeks to align voting rights in private banks with shareholding patterns.

“There is a consensus within the standing committee as well as between the UPA and the BJP on these two Bills, especially the PFRDA Bill, which was originally formulated when Yashwant Sinha was the finance minister under the National Democratic Alliance. The BJP has indicated its support for the legislation,” the person said.

Source : indianexpress.com