Insurance reforms Bill: dilemma for Congress

New Delhi: The deadlock over the insurance reforms Bill continued Tuesday, but with the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) determined to introduce the Bill in the Rajya Sabha, the Congress faces a dilemma—should it vote against what is basically its own Bill, or try to deal a political blow to the government.

Apart from scoring a political point, analysts say the Congress’s desire to prevent the Bill from being passed may also be driven by a desire to not give Prime Minister Narendra Modi a key talking point when he visits the US next month, or simply be a bargaining tool.

Indeed, two people familiar with the development said the Congress could trade its support for the post of leader of the opposition in the Lok Sabha, thus far denied it by the NDA.

Finance minister Arun Jaitley took a tough stand on Monday and said, in an interview with TV channel CNBC-TV18, that if the Bill is defeated in the Rajya Sabha, or delayed, the government is within its rights to call for a joint session of Parliament. He also offered to incorporate any minor amendments the Congress may want in the Bill.

The Bill was introduced in the Rajya Sabha in 2008 so it was to be taken up in the Upper House. The NDA has a comfortable majority in the Lok Sabha but doesn’t have sufficient numbers in the Rajya Sabha, even with the support of parties such as the Biju Janata Dal and the Nationalist Congress Party, both of which have said they will vote for the Bill. It has a majority in a joint session.

The Congress and several other parties wrote to the chairman of the Rajya Sabha asking that the Bill be sent to a parliamentary committee—a move that will effectively ensure that the legislation is delayed.

The Congress’s position is that the Bill, in its current form, is significantly different from the one it moved when in power.

The BJP says the changes are insignificant and that the Bill is essentially the same as that moved by the Congress-led United Progressive Alliance.

“I think there are no double standards on the insurance Bill by the Congress,” party vice-president Rahul Gandhi told reporters in Parliament House.

With an all-party meeting on Monday not reaching a consensus, the NDA put off introducing the Bill the same day. The NDA sees the Bill, which increases the stake foreign insurers can hold in Indian insurance firms to 49% from the current 26%, as something that will bolster its reformist credentials. Its ability to pass the Bill will also be a measure of its floor management skills.

The government is now expected to hold a meeting with the opposition parties on Wednesday. The Bill, which was earlier expected to be taken up in the Rajya Sabha on Wednesday, may come up only on Thursday.

“The government is clear in its stand, the Congress leaders can give us the suggestion it wants to introduce in the Bill. We are ready for any changes,” Union minister Prakash Javadekar told reporters in Parliament House. “The Congress is in trouble with our offer that we are ready for incorporating the changes,” he added.

The Congress, which argues that the amendments proposed by the finance minister in the Bill fundamentally change the definition of foreign direct investment (FDI), also rejected the BJP’s statement that the party is anti-reform and is acting against national interest. “Those who did not allow it to be passed in six years should not teach Congress what is in national interest,” Congress member of Parliament Anand Sharma said.

“Reference to select committee does not mean taking a confrontationist attitude. We are in favour of 49% FDI. It does not mean parliamentary processes should be bypassed,” he said, adding that it is the privilege of the House to get the changes examined by a committee. “Government has to accept what is reasonable and correct,” Sharma added

The latest version of the insurance Bill proposes a composite foreign investment cap of 49%, which will include both foreign direct investment and portfolio investment, but with a rider that the joint venture will have to be owned and controlled by the Indian promoter.

The initial version of the Insurance Laws (Amendment) Bill, tabled in December 2008, had proposed increasing the FDI limit to 49% from 26% without any mention of portfolio investors and any clause on management and control. However, the previous government, following opposition from the BJP, had suggested that within the overall cap of 49%, there could be a separate limit carved out for foreign institutional investors.

The standing committee of finance, then headed by BJP leader Yashwant Sinha, had opposed increasing the FDI cap and citing the global economic crisis and the sensitive and long-term nature of the sector, had made a case for retaining the 26% ceiling for foreign promoter participation.

Besides increasing the foreign investment cap, the Bill proposes to give more powers to the Insurance Regulatory and Development Authority and empower the regulator to penalize companies and agents in cases of mis-selling.

The passage of the insurance Bill is keenly awaited by a number of foreign insurance companies that are eager to increase their stake in the Indian joint ventures and bring in capital into this fund starved sector. There are around 50 insurance companies in the life and non-life space.