Posted On Friday, October 05, 2012 at 08:33:58 AM
New Delhi: After allowing foreign direct investment in multi-brand retail, the government on Thursday gave green signal to foreign investment in pension funds, and raised the FDI ceiling in the insurance sector to 49 per cent from the present 26 per cent.
|Finance Minister P Chidambaram said public and private players will benefit from the amendments in
the insurance and pension bill
Allowing FDI forms a part of the amendments to Pension Fund Regulatory and Development Authority (PFRDA) Bill, which was approved by the union cabinet. “The FDI limit in pension will follow FDI limit in insurance.
If insurance bill passes with 49 per cent, pension will also be 49 per cent,” said Finance Minister P Chidambaram. The Manmohan Singh-led Cabinet showed firm resolve to push ahead with economic reforms even as yet another UPA ally – the DMK – registered its opposition.
Union Fertiliser Minister M K Alagiri not only stayed away from the Cabinet meeting, but also submitted a note of protest. Though the government brought a lot of investment cheer to the stock markets – the Bombay Stock Exchange crossed the 19,000 mark, touching a 15-month high – it is not clear if the UPA would be able to convince Parliament to cooperate.
Already, it has turned traditional allies such as the Left, and even partners in the coalition, such as the DMK, against it. Berating the government for opening the insurance sector, CPI leader D Raja indicated that foreign investors should not be trusted. He said, “One thing that must be kept in mind is the private insurance companies in the US and in Europe have completely failed and collapsed.
So, why this private capital should be allowed to enter into our insurance sector?” Trinamool Congress’s Saugata Ray added, “Pension is related to the security of people and pension funds should not be introduced in a speculative market. We are going to strongly oppose the move strongly.”
The PFRDA Bill was introduced in the Lok Sabha in March 2011, following which the Standing Committee on Finance gave its recommendations in September, last year.
The bill, which would allow part investment of the corpus in stock markets, is likely to be taken up for discussion and passage in the upcoming session of Parliament.
Chidambaram said the government will “reach out” to all political parties, especially the Opposition party, to get the reform bills passed, even as BJP remained ambivalent, saying it would first like to see the “fine print” of the reforms.
On the issue of FDI in insurance , BJP spokesperson Prakash Javadekar said the Parliamentary Standing Committee on Finance headed by Yashwant Sinha had recommended 26 per cent FDI. "Sinha was the first to propose 49 per cent FDI in insurance, 10 years ago.
That time Congress had opposed it, and since we wanted to bring a consensus, we agreed on 26 per cent,” Javadekar said, and added the government has behaved in an “uncertain manner” on this issue.
“We are not opposed to FDI in insurance and pensions as we created it. Our concern is that many foreign companies have already invested more than 26 per cent through debenture- type investments. Now, that will be converted into equity so no new FDI will come in,” he said.