New Delhi: The Parliament on Friday passed an important piece of economic reforms legislation—the Pension Fund Regulatory and Development Authority Bill—that seeks to give statutory powers to the pension fund regulator and enable foreign direct investment (FDI) up to 26% in the pension sector.
It was one of a slew of legislation pushed through by the Congress-led United Progressive Alliance government before the end of Parliament’s monsoon session on Saturday, expecting to benefit the party politically and the nation economically.
The Lok Sabha also cleared the Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012 that seeks to protect the rights of urban street vendors from harassment by the police, municipal authorities and others. In addition, it passed the Prohibition of Manual Scavengers and their Rehabilitation Bill that bans manual scavenging as an employment and seeks to rehabilitate scavengers’ families. The Rajya Sabha also passed the Constitution (Scheduled Tribes) Order (Second Amendment) Bill, on Friday which seeks to modify the list of Scheduled Tribes in Chhattisgarh and Kerala in order to help those communities.
With these, both houses of Parliament have passed eight important draft laws in the monsoon session, making it one of the most productive of recent sessions.
The Bills are the Companies Bill, the National Highways Authority of India (Amendment) Bill, the National Food Security Bill, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, the Securities and Exchange Board of India (Amendment) Bill, the Wakf (Amendment) Bill, the Pension Fund Regulatory and Development Authority (PFRDA) Bill and the Constitution (Scheduled Tribes) Order (Second Amendment) Bill.
According to PRS Legislative Research, the Lok Sabha sat for a total of 63.77 hours till 5 September, while the Rajya Sabha sat for a total of 86.85 hours. The total time lost due to adjournments in the Lok Sabha was 56.23 hours (47%), while the Rajya Sabha lost 26.15 hours due to adjournments (23%). While the two key Bills of the session—the ones on food security and land acquisition— are expected to brighten the electoral prospects of the Congress-led United Progressive Alliance (UPA), Friday’s pension fund Bill is likely to boost investor sentiment at a time when the country is facing an economic crisis. The PFRDA Bill, 2011, which had been pending for 10 years, was cleared by the Rajya Sabha on Wednesday and will now go to the President for his nod following which it will become a law. PFRDA regulates the National Pension System (NPS), which manages the pension contributions of employees of central government and state governments and the unorganized sector. It has a corpus of around Rs.35,000 crore.
The passage of the Bill will bring the pension regulator on par with other financial sector regulators and give it powers to impose fines or penalties on companies found to be violating the law. As per the provisions of the Bill, the foreign direct investment (FDI) cap in the pension sector will be linked to the cap in the insurance sector. If the Insurance Act is amended to allow higher FDI of 49%, the increase will also be applicable to the pension sector.
The Bill also has provisions allowing for withdrawal of funds. The pension regulator can also notify schemes that provide minimum assured returns to investors.
The passage of the Bill in both houses came after the government managed to gain the support of the principal opposition Bharatiya Janata Party. Many members across party lines, however, expressed concern that the government does not plan to include provisions in the Bill to ensure assured returns to investors.
Finance minister P. Chidambaram, in his reply to the debate in upper House said that the government will address the legitimate concerns raised by the members. He added that the current structure in place in NPS will ensure that the funds are managed safely. On returns, he said, “NPS gives better returns than EPF (employees’ provident fund). The returns are more than government bonds. Returns are quite adequate.”
The pension Bill is the government’s second attempt at reforming the sector. In 2005, the government had introduced the pension Bill but could not get it passed as the Communists, its allies at the time, refused to back it.
Although the parties were keen to pass the Representation of the people (Second Amendment and Validation) Bill to overturn a Supreme Court ruling that disqualifies convicted legislators and lawmakers immediately, it could not be taken up for debate.
The Lok Sabha on Friday also passed the Rajiv Gandhi National Aviation University Bill to establish a national aviation university in Raebareli, the constituency of Congress president Sonia Gandhi.