Insurance sector thrown open as RS too passes IRA Bill

There were six motions by the non-Congress parties seeking the bill to be referred to the House Select Committee after Finance Minister Yashwant Sinha dismissed these attempts as an effort to delay the process.

When deputy chairperson Najma Heptulla who was chairing the proceedings put the motion of Ramashankar Kaushik to vote, it was defeated by a voice vote. The next motion of Gurudas Dasgupta was defeated 116-52 with the Congress and Bahujan Samaj Party supporting the government after the opposition sought division. Four other motions to this effect were rejected by voice vote.

Replying to the debate, Sinha asserted that the government and parliament had retained enough controls including issuing of policy directives to the regulatory authority and its supersession in the bill. The government was for opening up of the sector to competition and the apprehensions of some members that the country8217;s sovereignty had been surrendered were baseless, he said.

The bill, he said had been examined by two experts committee and by Standing Committee on Finance of Parliament and their suggestions incorporated in the bill. This is a process initiated by the government when Congress was in power and the United Front government had set up the Statutory Insurance Regulatory Authority through a 1996 bill.

He said the government had given its intentions of bringing the bill in its 1998 budget and there was no haste on the part of the government.

The apprehension that the bill was against the interests of LIC and GIC which enjoyed the monopoly in the insurance sector all these years was incorrect. They had performed their job to the best of their ability but they could cover only seven per cent of the population because of the vastness of the country. They would continue to compete with new players and the government would come out with a law on competition policy.

Sinha said the bill was unambiguous about the foreign and Indian insurance companies and it was not mandatory for the insurance firm to have a foreign partner. There were several companies which wanted to set up cent per cent Indian insurance firms without any foreign investments. The maximum quantum of foreign equity prescribed was 26 per cent.

There were also enough safeguards against flight of capital and 50 per cent of the funds would have to be invested in government securities and government approved securities. All firms would have to be registered with the regulator and every transaction would have to go through this statutory body. The GIC would remain the reinsurance company like in the past which would be an Indian domain thereby sealing the scope for siphoning off the money.