The chances of Parliament approving an increase in foreign investment limits in insurance companies improved after the Bharatiya Janata Party (BJP) and the Congress moved closer to strike a compromise on the issue. ?The government has intervened at the highest level and is speaking to opposition parties. The draft report will be circulated in the next meeting and then it is likely to be adopted by the select committee,? said a person familiar with the development who asked not to be identified.
An approval to the insurance Bill will, apart from providing a fresh stimulus for foreign investments, also indicate that a bi-partisan consensus on some economic reform measures is within the realm of the possible. The support of the Congress is crucial for smooth passage of the Bill in Rajya Sabha as the opposition party has 68 MPs in the upper house. Emboldened BJP leaders are now confident that they will be able to get the Bill passed in the winter session with the help of the Congress.
The Congress was in favour of increasing the foreign investment limit in insurance companies to 49% when it was in power. The Bill was under consideration of a standing committee of finance headed by Yashwant Sinha at the time. Still, the process to pass the Bill in Rajya Sabha will not be easy as some opposition parties led by Janata Dal (United) or JD(U), Communist Party of India (Marxist) or CPM, Samajwadi Party, Bahujan Samaj Party and Trinamool Congress have joined hands to oppose it. Their members skipped the meeting on Wednesday called by Chandan Mitra of the BJP, the chairman of the select committee looking at the Bill.
?JD(U) and CPM members are together preparing a common dissent note which will be endorsed by all the parties opposed to insurance Bill. The stand of the opposition parties is clear,? said a second person familiar with the matter who asked not to be identified. The five opposition parties together account for five members in the select committee of the Rajya Sabha, while the BJP and Congress have three members each in the parliamentary panel. The select committee was given an extension at the beginning of the winter session as two members of the BJP, Mukhtar Abbas Naqvi and J.P. Nadda, who were part of the panel, were inducted by Prime Minister Narendra Modi in the cabinet. The BJP will now have to appoint two more members to the select committee.
While the BJP is trying to get the Congress to go with the Bill, Odisha chief minister Naveen Patnaik?s Biju Janata Dal (BJD) signalled its willingness to support the bill in Rajya Sabha. BJD leaders were initially reluctant to support the bill, but have come around now, the two people familiar with the developments said.
The BJP will also have to convince former Tamil Nadu chief minister J. Jayalalithaa?s All India Anna Dravida Munnetra Kazhagam (AIADMK). ?AIADMK will first see the Bill and reveal its stand on the floor of the house,? said a third person familiar with the development who, too, asked not to be identified.
During the World Economic Forum in November, finance minister Arun Jaitley indicated the government?s willingness to open up some sectors to foreign investment and expressed hope that the insurance Bill would be passed in the winter session. The Bill proposes a composite foreign investment cap of 49%, which will include both foreign direct investment and portfolio investments, but with a rider that the joint venture will have to be owned and controlled by the Indian partner. The initial version of the Bill, tabled in December 2008, had proposed increasing the FDI limit to 49% from 26% without any clause on portfolio investors.
The move to pass the insurance Bill is awaited by a number of foreign insurance companies eager to increase their stake in the Indian joint ventures and infuse capital into the fund-starved sector. D.K. Srivastava, chief policy advisor at audit and consulting firm EY, said if the insurance Bill is passed in Parliament, it will strengthen overall sentiment of foreign investors since it signals that major political parties can come together for major economic reforms.?This will also provide greater depth to the insurance sector as more foreign companies can come in who can provide diversified insurance products in the country,? he added.