Chairman of the Rajya Sabha Select Committee Chandan Mitra on Wednesday tabled the report on the Insurance Laws (Amendment) Bill, 2008, recommending a hike in FDI in insurance sector from 26 to 49 per cent. The report, carrying dissent notes from four of the 15 members, incorporated Congress party’s demand for a composite cap on such investments.
The dissenting parties include the Samajwadi Party, Trinamool Congress, Communist Party of India (Marxist) and Janata Dal (United). These parties are opposed to further opening of the insurance sector to foreign investment.
Cabinet nod
The Union Cabinet that met late in the evening approved the incorporation of amendments suggested by a Parliamentary select panel in the Insurance Laws (Amendment) Bill, 2008, sources said.
Following the Cabinet’s approval, the Bill is expected to come up for consideration and passage in the Rajya Sabha next week. However, it may not have a smooth sailing in a house where the NDA does not have majority. The Congress party is on board but not keen to pass the Bill in this session before the arrival of U.S. President Barack Obama, who is the chief guest at the Republic Day ceremony, highly placed sources told The Hindu.
The report recommends that the composite cap of 49 per cent be inclusive of all forms of foreign direct investments and foreign portfolio investments. “Incremental equity should be ideally used for expansion of capital base so as to actually strengthen the insurance sector,” it said.
The report also recommended that the composite cap of 49 per cent be inclusive of all forms of foreign direct investments and foreign portfolio investments.
“Incremental equity should be ideally used for expansion of capital base so as to actually strengthen the insurance sector,” it said, adding that the term ‘control’ in terms of ownership and control of a company should be defined in the Act itself.
It further recommended that the term ‘control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.
The report modifies the definition of ``re-insurance’’ to bring clarity against the backdrop of foreign insurers wanting to set up operations in the Indian markets. It suggests that re-insurance may be defined as ``the insurance of part of one insurer’s risk by another insurer who accepts the risk for a mutually acceptable premium’’.
