#dnaEdit: Insurance gridlock

The government, once again on Monday, could not place the new insurance bill in the Rajya Sabha. The stalling opposition parties demanded its further revision and vetting by another select committee of the house. This means that the bill will have to wait at least another six months to see the light of the day. The irony is that the key opposition this time comes from the Congress which, if it so wants, can ensure the passage of the bill in the Rajya Sabha. Ironically, the Congress itself had formulated the earlier insurance bill, and stands committed to making it into law. But now in opposition, the party has reversed its stand.

Not having the required strength in Rajya Sabha, BJP-led NDA coalition is at the mercy of opposition parties for carrying the insurance bill thorough. While with its large majority in Lok Sabha, the insurance bill’s passage in this House is just a matter of mere formality. In this situation, the government’s floor management will determine the time for the passage of the bill. It is more a matter of political bargaining now, than a clash over the contents of the bill. 

Congress seems to want to thwart Modi’s attempts to showcase the insurance bill as a signal to further liberalising the Indian economy when he visits the US next month. Besides, the Congress is also cut up with the government on a number of counts. The party so far has not been given the official position of Leader of Opposition in Lok Sabha. It demands that status for itself. Nor has the Congress been given the post of deputy speaker, which is traditionally given to the opposition party which has the largest strength in the house, after the ruling party. Thirdly, the Congress has not so far bagged the position of the chairman of the Public Accounts Committee which also usually goes to the opposition. The Congress is now demanding these posts as price for its support for the insurance bill. 

While these are the behind the scenes calculations, the government’s efforts to evolve consensus through an all-party meet on Monday made little progress. Instead, both sides, dug in their heels deeper. 

A number of issues were raised by the opposition for their stance on the bill. While the Left and TMC were altogether opposed to the idea of allowing foreign investment in insurance in India, others pointed out that the current bill was much altered from the earlier draft.  

The new bill allows investment by foreign institutional investors apart from foreign direct investors. This has been objected to by some of the opposition parties, including the Congress. Since FII investments are not included in the overall FDI limit, such an interpretation of the law can give much higher investment right to foreigners than only 49%. The demand is therefore that FII investment, if at all allowed, must be included in the overall FDI limit of 49% explicitly.

There appears to be no end to the delay in raising the foreign investment ceiling in Indian insurance. Allowing such investments could bring in large funds which can then be invested in the emaciated infrastructure sector in the country. Indian infrastructure needs huge funds.

Whatever the outcome, the deliberations on the insurance bill must be made completely transparent. This is because these turns and twists in the process of the passage of the bill will have their inevitable impact on the share price of insurance companies. Thus any misinformation or information in the hands of a limited number of people can give rise to scope for insider trading and gains for the information holder. This should at all costs be avoided and information must be equally available to all.