LS passes IRA Bill amid walk out by non-Congress Oppn

A last minute bid by CPI(M) for reference of the bill to a joint select committee of parliament for scrutiny was rejected by 331 to 82 votes in a division insisted by Left members.

Under the official amendments moved by the finance minister, preference in registration will be given to companies for providing health insurance and it will be binding on the insurers to invest funds in social and infrastructure sector.

The new companies will mandatorily have to meet obligations relating to rural and unorgansied sector and each violation of the directions of the authority would attract penalty up to Rs 25 lakh.

The Congress members did not press their amendments since government accepted their suggestions.

However, Sinha did not yield to repeated pleas of the deputy leader of the Congress Madhavrao Scindia to plug a loophole in the bill that could allow circumventing of the law by `nominees’ of foreign companies to exceed the cap of 26 per cent foreign equity.

In his reply to the debate on the Bill, Sinha strongly allayed opposition fears about the possibility of breaching of foreign equity cap and flight of capital from the country.

"We are fully protected by the provisions in the bill and we have given full thought to the aspects about aggregate holding by foreign investors.

"There is no danger of this cap being crossed,” he said adding that definition of nominee in the laws was fairly wide and existing guidelines would take care of the problem.

He said instead of flight of capital, the growth of business would make foreign investors bring more money into the country. Under the Bill, foreign companies could repatriate only dividends that too only after seven or eight years of operation.

Sinha also said the insurance business would grow from about the present 2 per cent of GDP to 4.5 per cent by 2002-03.

He also dismissed fears that passage of the Bill would lead to privatisation of LIC and GIC and said the government had no plans to dilute its holdings in these two companies.

There would be no reduction of staff and the interests of existing five lakh agents would be fully protected. He said he was willing to continue dialogue with employees to allay their fears.

Sinha said the national insurance companies were already operating in 27 countries with 52 branches, subsidiaries and associates and were competing well. "If they can do well abroad, fears of their not holding on are totally unfounded," he emphasised.

He also ruled out the necessity for constituting an investor protection fund saying that the new companies would have to deposit Rs 10 crore each, which would act as a "nucleus" for any eventuality.

Sinha said the measure would create a strong statutory regulatory authority, which would be autonomous and prescribe guidelines for registration and operation of insurance companies.

He also rejected the possibility of undercutting by foreign companies saying that a strong regulatory authority would monitor their operations and assured that "a level- playing field" would be provided for national insurance companies vis a vis private players.

"If you look for a ghost behind every pillar then I cannot help it. India is a strong powerful country. No foreign company can take us for a ride," he added.