Updated: February 4, 2021 1:29:02 pm
When Finance Minister Nirmala Sitharaman announced an increase in FDI limit from 49% to 74% in the insurance sector and foreign ownership and control with safeguards, history is a cautionary and instructive reminder.
For, both the BJP and the Congress have opposed — and also backed — raising the limit at different times depending on whether they were in the government or the opposition.
So when the Insurance Act, 2015, comes to Parliament for amendment again, the debate will be keenly heard, its echo going back to 1996.
That December, P Chidambaram, then with the Tamil Maanila Congress and who was Finance Minister in the I K Gujral United Front government, tabled the Insurance Regulatory Authority Bill seeking to establish a regulatory authority for the insurance sector.
The Bill was referred to the Standing Committee. In his Budget speech of February 1997, Chidambaram said: “I propose to move necessary amendments to enable GIC (General Insurance Corporation) to float joint ventures and also to allow entry of selected Indian players in the health insurance sector.”
The Bill triggered stiff opposition from the Left. In Lok Sabha in August 1997, the late
A B Vajpayee said the BJP was “in favour of allowing more participation by private companies in the insurance sector. There should be competition in the insurance sector.”
But on foreign participation, he said: “The Finance Minister is of the view that this Bill would not provide unrestricted entry to the multinationals. But we have some apprehensions in this regard. He has made repeated attempts to convince us. But the doubts still persist.”
Chidambaram said the apprehension that foreign insurance companies are going to enter India is misplaced and there was no such proposal.
The late Jaswant Singh was more emphatic.
“We believe that the Insurance sector must be opened out. Secondly, we are clear in our minds that…it must be opened out to Indian entrepreneurs. Thirdly, we are equally clear in our minds that if you permit…foreign corporations, you will be doing two very great wrongs. One, you will permit the utilisation, essentially of Indian money by foreigners… and second… you will…prevent the growth of a…healthy Indian insurance industry which can stand up on its own,” he said.
The Bill was finally withdrawn. “There is the Left which opposes any kind of opening to the private sector. There is the Congress which cautiously supports an opening. There is the BJP which supports an opening only to (the) Indian players…. With these three positions staring in my face, if I want to carry on the business of managing the finances of this country and reforming, I must come back to you again and again and try to convince you,” Chidambaram told Lok Sabha on August 6, 1997, shortly before withdrawing the Bill.
Cut to 1998.
Yashwant Sinha, Finance Minister in the Vajpayee government, tabled a Bill allowing FDI up to 26% in insurance sector. But the Bill lapsed due to fall of the NDA government in April 1999. In November 1999, Sinha tabled the Bill again.
Replying to the debate – despite a walkout by the Left, Samajwadi Party and the RJD – Sinha tried to draw a distinction between his and the UF’s Bill: “(That) was a Bill which proposed the setting up of an Insurance Regulatory Authority only. It did not talk about the amendment of the LIC, GIC Act. It did not talk about the opening of the insurance sector to private sector Indian firms. It did not clarify how we shall define the Indian private company.”
Sinha then went to draw the FDI line. “We are not forcing Indian companies that you must have 26 per cent foreign equity. We are merely saying that if you wish to have foreign equity, you want to have a foreign collaboration, then you can go up to 26 per cent.”
The NDA government, before its demitted office in 2004, toyed with the idea of raising the cap to 49% if the balance of 23% was given to NRIs, PIOs, OCBs, FIIs but the Congress opposed it.
The Government changed in 2004. And when the UPA expressed its intention to raise the FDI limit from 26 to 49%, the Left and the BJP were on the same side.
In his first Budget speech on July 8, 2004, Chidambaram, back as Finance Minister, proposed to raise the sectoral cap for FDI in insurance from 26 to 49%. Vajpayee opposed: “Hum virodh karenge.”
In December 2008, the UPA introduced the Bill to raise FDI cap to 49%. The BJP refused to play ball.
The Bill was referred to the Standing Committee on Finance. In 2011, the Standing Committee headed by Yashwant Sinha submitted its report recommending that FDI limit in insurance should not be raised.
The Government changed again and this time Jaitley, as Finance Minister, pushed for the passage of the proposal.
In August 2014, months after the Modi government came to power, the Insurance Laws (Amendment) Bill, 2008, which proposed to raise the cap, was referred to a Parliamentary select committee after opposition from the Congress and other parties.
In December 2014, the Government promulgated an ordinance to hike the FDI limit since the Bill was hanging fire. And in March 2015, the Government introduced a Bill to replace the ordinance despite objection from the Lok Sabha and got it passed.
This was done despite a similar bill pending in Rajya Sabha. Days later, the Rajya Sabha too passed the Bill after the Congress and some other parties backed the ruling NDA.
The SP, BSP, JD(U) and DMK staged a walkout but the Congress, NCP, BJD and AIADMK stood by the government which also had the support of allies Shiv Sena and Akali Dal.
“In 2008, this Bill could have been passed. Millions of Indians could have been brought under the insurance net. And we did not succeed in doing that…Those on the other side, when they were on this side, found all kinds of reasons to come in the way of financial inclusion of insurance… of the poorest of the Indians…I am glad that they have come to their senses. Unlike them, we are not going to take ‘U’ turns. We are going to ensure that we are going to support this Bill,” Congress’s Rajeev Gowda had said in the debate on March 12, 2015.
Six years later, the BJP government proposes to raise the limit to 74% and the Congress has indicated its support Chidambaram calling it “inevitable”.
“But I remember the day in 1997, when the BJP voted against the bill introduced by the Government of the day allowing 20% FDI in insurance…Today, they have done a full circle and they are allowing 74% FDI in insurance, which is okay in terms of capital,” he said Monday.
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