Notwithstanding the strong opposition to its reforms agenda, the Manmohan Singh government on Thursday pressed ahead with more big-ticket reforms, raising the FDI cap in the insurance sector to 49 per cent, opening up the pension sector for foreign investment and clearing the Companies Bill, 2011. It also approved amendments to the Competition Act, 2002, and the Foreign Contracts (Regulation) Amendment Bill, 2010.
To give a push to the infrastructure sector, the Cabinet also cleared a tripartite agreement for Infrastructure Debt Fund (IDF), the 12th Five Year Plan document and granted international airport status to the Lucknow, Varanasi, Tiruchi, Mangalore and Coimbatore airports.
The tripartite agreement is among the developer, the lender (bank) and the IDF. Loans will be refinanced by the IDF so that banks could have free funds for more lending. The IDF, proposed in the Union budget for 2011-12, is aimed at accelerating and enhancing the flow of long-term credit for funding infrastructure development.
However, the government could run into trouble as the Pension Fund Regulatory and Development Authority Bill, 2011, and the Insurance Laws (Amendment) Bill, 2008, which have been pending in the Rajya Sabha, could face a stiff opposition in Parliament.
The Cabinet, at a meeting presided over by Prime Minister Manmohan Singh, decided to raise the cap on FDI in insurance from 26 per cent to 49 per cent, citing the growing capital requirements of capital insurance companies. The sector needed $12-billion worth of investments, which could come off only if the FDI limit was raised, the government argued.
The Cabinet also approved certain amendments to the Pension Fund Regulatory and Development Authority Bill. “These amendments have been necessitated in view of the recommendations of the Standing Committee on Finance, which has examined the Bill. The government has decided to accept five key recommendations,” an official release said. Though the cap on FDI in the pension sector has not been announced, Finance Minister P. Chidambaram said it would be of the same order of 49 per cent as in the insurance sector.
The Cabinet approved the Forward Contract Regulation Act (Amendment) Bill, which seeks to give more powers to the Forward Markets Commission (FMC), the commodity markets regulator. It will strengthen the FMC by providing it with financial autonomy, facilitate the entry of institutional investors and introduce new products for trading such as options and indices.
The Cabinet gave the green signal for further amending the Competition Act 2002, so as to meet the present-day needs in competition, in the light of the experience gained from the working of the Competition Commission of India in the past few years.
The Companies Bill, 2011, meant to ensure the growth and regulation of the corporate sector, was also approved.
