Insurance reforms continued to be in a limbo as the group of ministers headed by Pranab Mukherjee failed to win the support of the four Left parties.
NEW DELHI: Insurance reforms continued to be in a limbo as the group of ministers (GoM) headed by Pranab Mukherjee on Tuesday failed to win the support of the four Left parties, providing crucial support to the UPA government from outside, for the legislation that would permit an increase in foreign equity limit from the present 26% to 49% in insurance companies.
The Parliament went into recess on Tuesday, a day ahead of the schedule, to meet again only on April 26.
Officials said GoM would perhaps make another attempt at convincing the government’s Left allies, but chances of the insurance amendment Bill being introduced in the current Budget session are bleak.
The GoM comprising finance minister P Chidambaram, deputy chairman of the Planning Commission Montek Singh Ahluwalia, law minister H L Bhardwaj and labour minister Oscar Fernandes made a presentation to Left MPs including Gurudas Dasgupta of CPI and Basudev Achariya of CPM.
The presentation focused on the country’s huge needs for long-term funding, especially for infrastructure projects, and argued that allowing higher foreign stake in insurance companies will help mobilise these resources.
“Our response was negative,” Dasgupta said after the meeting.
He said foreign investors usually take a short-term view of the market and it would be futile to expect them to help mop up long-term finance.
Domestic investors have the capacity to invest the necessary capital in insurance companies.
The setback to insurance reforms comes on top of the roadblocks the government has been experiencing with regard to banking and pension reforms.
The Left parties have been able to block the legislations in all the three areas of financial sector reforms.
This is particularly frustrating for the finance minister, who had recently assured the visiting UK chancellor of the exchequer Gordon Brown that the government would
introduce the legislation for raising the foreign direct investment ceiling in insurance to 49% in the budget session.
Chidambaram had also expressed confidence at a recent news briefing that the GoM would clear the insurance Bill in a couple of sitting since every thing was in place. Tuesday’s was the second meeting of the GoM.
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