Govt keen to push insurance Bill in Winter session
New Delhi: Keen to push insurance sector reforms, the UPA government is contemplating a proposal under which the FDI cap in insurance sector would be raised from 26 percent to 49 percent without commensurate increase in voting rights.
According to sources, the government is also looking at the possibility of allowing 23 percent FII investment, over and above the existing FDI ceiling of 26 percent in the sector.
These permutations and combinations, they said, are being worked out to elicit support of the principal opposition party BJP, which is not opposed to the insurance sector reforms but has reservations about hiking the FDI limit.
The legislation is likely to be taken up in the upcoming Winter Session of Parliament, which would be the last full session of the current government before 2014 Lok Sabha polls.
The Bill seeking to raise FDI in insurance sector to 49 percent has been pending in Rajya Sabha since 2008. The Standing Committee, to which it was referred earlier, has already given its report to the Parliament.
The ruling UPA is keen to pursue the insurance sector reforms and the Cabinet had in October 2012 approved the proposal to raise Foreign Direct Investment (FDI) cap to 49 percent.
Finance Minister P Chidambaram had earlier met main opposition leaders on the issue, but no compromise formula was worked out.
The Bill could not be taken up in the Rajya Sabha as the ruling party does not enjoy a majority in the Upper House. It needs BJP's support for pushing the insurance sector reforms.
Private sector insurance companies are demanding a hike in the sectoral FDI cap as they need capital from their foreign partners to expand business.
At present, there are over 20 private sector life and non-life insurance companies each, besides state-owned LIC, GIC and four general insurance companies.
The insurance industry was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act, 1999).
This Act permitted foreign shareholding in insurance companies to the extent of 26 percent with an aim to provide better insurance coverage and to augment the flow of long-term resources for financing infrastructure.