New Delhi: A controversial Bill providing for raising the FDI cap in insurance sector to 49 per cent was introduced in Rajya Sabha on Thursday but not before a heated debate and adjournments over technicalities as a similar legislation was pending in the House.
The Insurance Laws (Amendment) Bill, 2015 was introduced after Deputy Chairman PJ Kurien ruled that the new bill, as passed by the Lok Sabha, could be taken up as it was a "unique and unprecedented" situation.
Members from Left parties, TMC and SP were questioning how a new bill could be introduced when a similar legislation of 2008, which was scrutinised by a Select Committee of Parliament, was pending. They contended that the House is setting a "wrong precedent" by not appoving its listing by the Business Advisory Committee.
Kurien acknowledged that the situation was "unique and unprecedented" but it is up to the House to either allow, withdraw or reject the Bill. The bill seeks to replace an ordinance issued by the government earlier, which had come under sharp attack from various quarters. With the House witnessing heated discussions, it was adjourned twice, once for 10 minutes and then again for 30 minutes.
The bill was then taken up for consideration and the previous Bill was withdrawan by Minister of State for Finance Jayant Sinha. It seeks to amend the Insurance Act, 1938 and the General Insurance Business (Nationalisation) Act 1972 and the Insurance Regulatory and Development Authority Act, 1999.
It provides for raising FDI cap in insurance sector from 26 per cent to 49 per cent. The Lower House had passed the Bill on March 4.
Earlier, D Raja (CPI) moved a statutory resolution opposing the ordinance promulgated by the government in December last year immediately after the Winter Session of Parliament to raise the FDI cap.
He said the ordinance route to raise the insurance cap is "detrimental" to the interest of the country and would only allow those foreign insurance companies, which fail in their market, to exploit Indian market.
He was supported by P Rajeeve (CPI-M) and Derek O'Brien (Trinamool Congress). Rajeeve demanded to know the fate of the recommendations of the Select Committee which had examined the earlier bill. He wanted the Chair to uphold the dignity of the House.
Joining him, Naresh Agrawal (SP) said the situation has given rise to a "constitutional crisis". Intervening at this point, Parliamentary Affairs Minister Venkaiah Naidu said the Select Committee recommendations could not be pursued because of several reasons.
"The government subsequently came up with an ordinance and a bill was passed in the Lok Sabha replacing it as per the Constitution," he said. Initiating a debate on the bill, MV Rajeev Gowda (Cong) supported the legislation and said its enactment will ensure larger coverage of the population under the insurance net.
India at present is ranked way down at 40th in terms of insurance coverage, he said. He, however, cautioned that there should not be any further rise in FDI cap and that at no point of time the Indian ownership is compromised.
Participating in the debate, Chandan Mitra -- BJP leader who headed the Select Committee for the Insurance bill -- pitched for raising the FDI cap in the sector to 49 per cent saying that the flow of foreign funds will benefit the country which is under-insured at present.
Foreign funds are required for expansion of the insurance sector and increasing penetration in rural areas as there is a limit on how much government can and should do in this area, he said.
Stating that India's insurance sector has grown since FDI was allowed way back in 1999, Mitra said collection of premium amount has touched Rs 3,64,420 crore now as compared to mere Rs 19,513 crore in 1999.
FDI is required as regulator IRDA says that insurance premium can increase to 6 per cent from the existing 3.21 per cent at a GDP growth rate of 7 per cent.
"To enable this expansion, Rs 44,500 crore funds are required. Raising FDI will bring Rs 21,805 crore funds into the sector. Without increasing the FDI cap, these funds will not flow," Mitra said.
He said the LIC chief had favoured the proposal and had informed the Select Committee that it had to remodel its policies to be competitive in the market after the entry of FDI and it is doing well.
Stating that the higher FDI will expand penetration, Mitra said, "There is genuine problem of penetration in rural areas. Insurance companies do not have branch offices in large parts of the country. Even LIC has not been able to cover the whole country despite infrastructure."
There is no need to raise a hue and cry as India is proposing to raise FDI to 49 per cent in insurance sector, while countries like the US, the UK, Japan, Australia have allowed 100 per cent and that of Indonesia (80 per cent), Malaysia (51 per cent) and China (50 per cent), he added.
Ram Gopal Yadav (SP) said he would not wish to obstruct the bill but wants to warn the government that the move will lead to entry of bankrupt foriegn companies who will do nothing in the sector.
Apprehending that foreign companies will kill state-run LIC, he said people have fears about entry of foriegn companies in this sector. He suggested the government to ensure foreign companies too follow similar conditions which are imposed on LIC at present.
He said it was a wrong perception that hike in FDI will benefit the country. Efforts need to be made in the area of crop insurance as well. Urging the government to make regulator IRDA effective, Yadav said, "IRDA chairman is Finance Minister. Not a single meeting has been held. Reconstitute it and make it effective."
Expressing doubts on inflow of foreign investment in the sector, Sharad Yadav (JD-U) said, "When FDI cap was 26 per cent, nobody came. Do you think they will come at 49 per cent. They are traders. They know how to do business."
He said foriegn companies will not come to serve the nation but to make business. Strongly opposing the bill, Derek O Brien (AITC) said, "They believe FDI is magical herbs to cure all ills in India."
He mentioned that private companies charge high premium and there are high risk associated with putting funds in ULIP (Unit Linked Insurance Plan).
Private companies invest 65 per cent of funds in ULIP, while that of 8 per cent by LIC. The premium charged by private firms is as high as Rs 60,000 as against a premium of Rs 9,000 by LIC. Also, claims and settlement and lapse ration is better at LIC, he added.
Referring to 100 per cent FDI allowed in the US as mentioned by BJP member Chandan Mitra, he said only 13 states in the US have adopted while 37 have never allowed. Supporting the bill, AIADMK leader Navaneethakrishanan said the government has incorporated good safeguards while raising FDI cap.
He suggested the government to make it mandatory for foreign companies to funds development projects in the country.
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