New Delhi: The Rajya Sabha is expected to refer the insurance amendment Bill to a select committee for further scrutiny in a move that would delay a key economic reform proposed by Prime Minister Narendra Modi’s government and cast a cloud over other policy changes it is seeking to push through Parliament.

The upper House, in which the ruling National Democratic Alliance (NDA) is in a minority, is expected to send the Insurance Laws (Amendment) Bill 2008 to the select committee before the current session of Parliament ends on 14 August, said a Union minister who spoke on condition of anonymity.

A select committee is made up of members from political parties in proportion to their strength in the house, meaning that the Bharatiya Janata Party (BJP) that leads the NDA, and its partners, would be in a minority in the panel that’s formed to look into specific legislation and suggest changes.

The Bill, which proposes to increase the cap on foreign direct investment (FDI) in insurance joint ventures to 49% from 26%, has been seen as a litmus test of the NDA’s resolve to implement crucial economic reforms and its skills at parliamentary floor management.

The inability of the NDA, which won a majority in the April-May Lok Sabha elections, to manage the numbers in the upper House casts doubts over other reform-oriented legislation such as proposed labour law changes, a new process for judicial appointments and changes to the land acquisition policy.

“It is a setback to the government. The government has to reflect on how it wants to engage with the opposition," said Balveer Arora, chairman of Centre for Multilevel Federalism, a New Delhi-based think tank. He said the opposition Congress seemed to be paying back the BJP “in the same coin," referring to the resistance the BJP put up against attempts by the Congress-led United Progressive Alliance (UPA) to legislate changes in the insurance sector and introduce a goods and services tax.

“It is disappointing for the business community. The government has not thought out its strategy and has not done its homework properly," Arora added.

At least two Congress party leaders, speaking on condition of anonymity, indicated that the party is likely to insist on sending the Factories (Amendment) Bill 2014, the BJP’s ambitious labour reform legislation, also to a select committee in the Rajya Sabha if it gets passed in the Lok Sabha.

The BJP, its partners and like-minded parties together have 70 members in the 242-member Rajya Sabha while the Congress alone has 69.

The government is likely to refer the constitution amendment Bill, that seeks to establish a six-member body for appointment of judges to the Supreme Court and the high courts, also to a standing committee, said a senior BJP leader on condition of anonymity. Every party wants a detailed discussion on the Bill, the person said. The Constitution (121st Amendment) Bill, 2014 and the National Judicial Appointments Commission Bill, 2014, were introduced in the Lok Sabha on Monday.

Although finance minister Arun Jaitley unveiled amendments to the insurance Bill earlier this month, the government could not take the legislation forward as the Congress, the largest party in the Rajya Sabha, insisted that it be referred to a select committee to study it and suggest changes. At least 11 parties in the House backed the Congress.

To be sure, referring a Bill to a select committee does not mean the legislation is shelved, only delayed. Any changes suggested by the panel will, however, be binding on the government.

Sending the insurance Bill to a select committee is unlikely to really affect the legislative reforms agenda of the government, said Surjit Bhalla, chairman of Oxus Investments.

“It may cause some delay," he conceded, but added: “BJP would wish that it did not happen. But if they (opposition) delay it by two or three months, then you will have elections in Maharashtra and Haryana, where, if there are big surprises (in favour of the NDA), then they will have bouts in order to carry out the legislative reforms. So I will not put too much weight on it."

According to the Union minister cited in the first instance, the government is confident that the insurance Bill will be eventually passed by Parliament and the reforms will be in place soon.

“In the meantime, we will be able to expose the Congress, which opposes its own Bill just because they do not want to give credit to Prime Minister Modi before he goes to the US in September. We have nothing much to lose," the minister said.

The Congress-led UPA, which was ousted from power in the recent Lok Sabha elections, proposed the Bill seeking to raise the FDI cap in insurance, but could not push it through in the face of resistance from the BJP.

Now the Congress, which claims to have the support of 154 Rajya Sabha members on its demand for select committee scrutiny of the Bill, wants clarifications on Indian ownership and control of the insurance companies once the proposed amendments are put in place.

Liberalization of FDI limits in various sectors, including insurance, has been keenly awaited by foreign investors looking to either enter the Indian insurance market or seeking to increase their stakes in existing Indian joint ventures.

The proposed higher limit will be a composite investment cap that will include both FDI and portfolio investors, but with a rider that the joint venture will have to be owned and controlled by the Indian partner.

PTI and Mint’s Asit Ranjan Mishra contributed to this story.

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