New Delhi: Parliament on Thursday night approved
the NDA government's first major economic reform measure as the long-pending
bill providing for raising foreign investment cap to 49 percent in insurance
was passed by Rajya Sabha after main opposition Congress and some other parties
came on board.
The controversial Insurance Laws (Amendment) Bill, 2015, which
replaced an ordinance promulgated in December last, was passed by voice vote
after walkout by Trinamool Congress and DMK.
The smooth sailing of the bill in the Upper House, where the
ruling NDA is in a minority, was possible with the help of opposition parties
like Congress, AIADMK, NCP and BJD besides allies Shiv Sena and Akali Dal.
The bill was introduced on Wednesday evening after a heated
debate and adjournments over technicalities as a similar legislation was
pending in the House.
The original bill, which was brought by Congress in 2008, was
withdrawn and the new bill was passed after a debate of about two-and-a-half
hours.
Trinamool Congress and Left parties strongly opposed the
measure. While Trinamool, DMK as also SP, BSP and JD(U) staged a walkout, Left
members moved amendments which were negated.
The bill, which was passed by Lok Sabha on 4 March, provides for
raising the foreign investment cap in insurance sector from 26 per cent 49
percent and is expected to bring in funds to the tune of thousands of crores.
The bill was introduced after Deputy Chairman PJ Kurien ruled
that the new legislation, as passed by Lok Sabha, could be taken up as it was a
"unique and unprecedented" situation.
Moving the bill for consideration and passage, Minister of State
for Finance Jayant Sinha said the measure was necessary for expanding the
penetration of insurance in the country which is very low at present.
He said the measure would help go beyond life insurance to cover
other aspects of like health and crop besides providing more funds for
development of infrastructure.
Seeking to allay apprehensions, Sinha said the premium will not
flow out of the country but will remain within the country and the interests of
policy holders will be protected by the IRDA.
The bill provides for imprisonment of up to 10 years for selling
policies without registration with the regulator IRDA.
The legislation will also allow PSU general insurers to raise
funds from the capital market and provides for increased penalty to deter
multilevel marketing of insurance products.
He said more and more FDI is required in the sector to provide
more coverage to people of India.
Sinha also sought to allay apprehensions that state-run LIC
would be hurt if foreign companies come in, saying it was a very competitive
body and match global players.
At the same time, he said the country needs not one, but five to
10 LICs.
The government agreed to incorporate suggestions made by
Congress leader Anand Sharma for infusing capital in General Insurance
Corporation (GIC) and strengthening it.
"You need capital to pay out claims. We do not have a
developed insurance market... Capital is required for provisioning...
(Insurance Companies should) have enough capital in hand... If we do not have
capital we cannot grow the industry," the MoS Finance said.
He said capital will flow after raising the cap as large
insurance companies want legislation and clarity.
The recent Rs 1.5 lakh crore MoU between LIC and Railways shows
that insurance sector could play an important role in the country's
infrastructure development, Sinha said.
The Minister said large insurance companies would benefit
citizens "twice" as they will be protected and also avail of better
infrastructure.
The law provides that 15 percent of the premium should be
invested in building infrastructure.
Allaying concerns of members about investment by FIIs, he said
investment will remain with the company irrespective of what happens in the
secondary market.
He also said that the Insurance regulator IRDA is being equipped
to deal with complaints and claims and will also have Ombudsman.
While supporting the bill, Shiv Sena member Anil Desai said LIC
employees foresee "onslaught" on their hard earned business.
Akali Dal member Naresh Gujral also supported the measure but
wanted the government to ensure that foreign investments should not go to
select individuals.
Government got signals of relief yesterday when main opposition
Congress indicated willingness to support the insurance bill.
The issue came up for discussion in a meeting held by Finance
Minister Arun Jaitley with leaders of all parties in Rajya Sabha on Wednesday
morning.
The meeting saw Congress indicating willingness to support
insurance bill after government agreeed to opposition demand for referring the
Coal and Mines bill and the Mines and Minerals bill to Select Committee.
"Insurance bill is different. It has gone through Select
Committee. There could be a unanimity on insurance," said a senior leader
from the Opposition block on Wednesday.
The support of Congress and other opposition parties was
critical for the NDA government in Rajya Sabha because of its less numbers
there.
PTI