With the Reserve Bank of India expressing its reservations recently, it is not the last word yet on the recent turf war over ULIPs (unit-linked insurance products), despite the ordinance. The Finance Ministry on Tuesday said a Bill to replace the ordinance would be placed before Parliament in its forthcoming session beginning July 26.
“Regulators have raised their points of view. The Finance Minister has taken note of those issues. The ordinance, in whatever form, has to be placed before Parliament. It is matter of a few days when this [Bill] will be tabled and everybody would know what the future course of action on this particular piece of regulation is,” Finance Secretary Ashok Chawla told the media on the sidelines of a conference here.
Following a bitter turf war between market regulator SEBI and insurance regulator IRDA over the control of ULIPs, the government chose to issue an ordinance empowering IRDA to regulate these insurance schemes although their value is linked to the market price of shares invested in.
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However, shortly after, RBI Governor D. Subbarao had a meeting with Finance Minister Pranab Mukherjee to put on record the apex bank's reservations on the ordinance. “I have come to meet the Finance Minister in connection with the ordinance that they have issued regarding settlement of the dispute on regulatory jurisdiction. The RBI has certain reservations and concerns, which we have expressed in the letter,” Dr. Subbarao had said.
Existing mechanism
Under the existing mechanism, inter-regulatory matters are looked into by a high level coordination committee headed by the RBI. The panel comprises officials of financial sector watchdogs and the Finance Ministry.
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In the event, following the RBI's concern over the ULIP ordinance, the Finance Minister later maintained that his Ministry would not intervene in the autonomy of regulators. “The intentions are quite clear. We are not going to intervene in the autonomy of regulators,” Mr. Mukherjee had said.
Meanwhile, the Direct Taxes Code (DTC) Bill and a constitutional amendment Bill to usher in the Goods and Services Tax (GST) are likely to be introduced in the Monsoon session of Parliament beginning July 26.
Interacting with the media on the sidelines of a CII conference on GDP growth, Revenue Secretary Sunil Mitra said: “It is our expectation that the constitutional amendment Bill and the DTC Bill would be introduced in the monsoon session.''
As announced by Finance Minister Pranab Mukherjee in his budget speech in February this year, the Centre's endeavour is to introduce the GST for indirect taxes and DTC for direct taxes from April 1, 2011.
Towards this end, Mr. Mukherjee is scheduled to meet the Empowered Committee of State Finance Ministers on Wednesday to discuss the constitutional amendments that are required for rolling out GST — a combined tax that would replace excise duty and service tax at the Central level and the value-added tax (VAT) at the State level, apart from surcharges and other local levies.
“On GST, we are having the meeting of the empowered committee on Wednesday. The basic thrust is the IT system. Nandan Nilekani [the UIDAI Chairman] will make a presentation. And we need key decision on a common portal on PAN-based registration,” Mr. Mitra said.
As to whether further changes are likely to be carried out, Mr. Mitra noted that changes in the DTC Bill from what was proposed in the first draft would be possible until it was placed before Parliament. “Until the DTC goes in the form of legislation in Parliament, there is always scope to consider issues,” he said.