FM for review of insurance, PF

CHENNAI, Dec 13: Union Finance Minister P Chidambaram said there was an urgent need to "take a fresh look at insurance, pension and pr...

CHENNAI, Dec 13: Union Finance Minister P Chidambaram said there was an urgent need to "take a fresh look at insurance, pension and provident funds." The approach in our country to "contractual savings" needed to change, he said as these were the only areas that could fund the "mind boggling requirements" in developing infrastructure.

The reasons for his plea to open the insurance sector were not ideological, he said, but "recognition of reality" and so that the long term funds of people could be tapped. Seeking to allay fears over the possibility of provident funds being misused if opened up the finance minister said “we should look at the world-wide experience.” Pension funds, he said, had been classified as insurance and this had to be changed. “This nexus had to be broken,” he said while inaugurating the Infrastructure Development Finance Corporation Ltd (IDFC) here on Saturday.

In none of the infrastructural sectors did India have any world class quality to boast of, he lamented. Even our Railways were adequate but did not possess “world class quality.”

The Rakesh Mohan report was an early step in meeting the staggering infrastructure needs, he said and added that because of the United Front “we now had good sectoral policies in infrastructure.” The origins of IDFC lay in that report, he said.

IDFC was the first apex developmental financial institution (DFI) to be based here, Chidambaram said and its mission statement was not to lend capital but to “lead capital” into infrastructure projects. With a requirement of Rs 5,20,000 crore in infrastructure over the next five years, IDFC was “an idea whose time had come many years ago,” said Deepak S Parekh, the chairman of IDFC. The institution was only an “element in the framework” to raise resources he said.

Speaking earlier, the Tamil Nadu Chief Minister M Karunanidhi expressed his satisfaction that finally an apex institution had been based at Chennai. Even in IDFC’s case, he said, the corporate headquartes were situated at Mumbai. The headquaters here were only in “name-sake” he said. Referring to the terms of Delhi being India’s political capital and Mumbai the financial capital, Karunanidhi said it was essential that there be “balanced growth in every region of India. Centralisation of power, as well of financial institutions in any one place is inconsistent with our ideology,” he said. Of IDFC’s Rs 1000 crore paid up equity 40 per cent has been subscribed by the government, 40 per cent by foreing investors, mainly multilateral agencies, banks and insurance companies, and 20 per cent by domestic FIs and banks, according to an official statement here. In addition, the government and the Reserve Bank of India had provided Rs 650 crore as subordinated capital. IDFC begins with a total capital base of Rs 1650 crore, the statement said. Earlier this month IDFC had approved financial assistance and guarantees to Jindal tractabel Power Company Ltd and Bina Power Supply Company Ltd, it added.