The Rajya Sabha on Wednesday passed the Insurance Amendment Bill 2021 that increases the maximum foreign investment allowed in an insurance company from 49% to 74%, amid criticism from the Opposition parties on the clause enabling “control and ownership” by foreign investors.
The Opposition parties unsuccessfully tried to stall the house demanding that the bill not be moved in a haste and instead be sent to a standing committee. They marched into the well of the House after Finance Minister Nirmala Sitharaman moved the Bill. The House was adjourned four times, between 2:30 p.m. and 3:30 p.m., as the impasse continued.
The debate started at 3:30 p.m., when the Opposition relented reluctantly to have a debate instead of continuing with the protests slamming the government for its obduracy.
Senior Congress leader Anand Sharma opened the debate questioning the very justification and intent for such a bill. He said when the government has majority in both Houses why is it in a hurry to pass the bill ducking due parliamentary scrutiny that the Opposition is demanding. He said the insurance companies hold the people’s money in trust and that this Bill breaks it. He also accused the government of violating the assurance given in 2015 that “Indian ownership and control” will remain. The Bill, he said, has been brought with urgency, to divert attention from the high fiscal deficit and is in line with the government’s recent measures to privatise national assets.
Mr. Sharma said, “We are not opposed to the policy of disinvestment, but is it disinvestment or leapfrogging towards privatisation and embarking on grand clearance sale of national assets built assiduously over the years.”
He also flagged that the big insurance firms are not in shortage of capital and that the Bill differed from the government motto — “Atmanirbhar Bharat”.
DMK MP Tiruchi Siva pointed out that none of the insurance firms have managed to get FDI even up to the present limit of 49% and questioned the justification to increase the limit.
Replying to the debate, Finance Minister Nirmala Sitharaman assured the House that the policy holder’s money will not leave Indian shores and have to be compulsorily invested here. She argued that more FDI would mean greater competition and thus better negotiated premiums for the end user.
Many of the members had flagged that greater control of foreign firms would also mean that the policy of reservation will be undermined. Answering this query, Ms. Sitharaman pointed out that the public sector insurance firms employ only over seven lakh persons while the private sectors have more than 23 lakh employees and agents.
The reservation policy will continue in the public sector firms, she said. She also said since the sector was opened up in 2000 by allowing 26% FDI, there has been a growth in the number of companies, insurance penetration and jobs. In 2015, the Narendra Modi government had brought another amendment hiking the FDI limit to 49%. “From 2015 onwards, in the last five years, ₹26,000 crore foreign investment has come in and 12 new insurance firms have opened up,” she said.
Samajwadi Party MP Vishwambhar Nishad asked the government on how it will deal with a foreign firm not governed by Indian rules if it declares bankruptcy, sinking the savings of millions of Indians. “All the firms will have to maintain reserves to meet the policy insurance claims. So the citizens’ claims will be protected,” she said. She also pointed to Section 27 (e) of the Insurance Amendment Bill that says “No insurer shall directly or indirectly invest outside of India the funds of Indian policy holders.”
Countering the key criticism by the Opposition parties on handing over “control and ownership” to foreign firms, Ms. Sitharaman said it comes with safeguards. The key management personnel will have to be Indians and therefore will be governed by the Indian laws.
Many members at this point flagged the cases of Vijay Mallya, Mehul Choksi and Nirav Modi who escaped defaulting on huge loans. “Let me tell you, Vijay Mallya, Mehul Choksi and Nirav Modi are all coming back here, to face the law of the land,” Ms. Sitharaman said.
There was no clear reply from the Minister on the urgency to bring this Bill, since many members pointed out that most of the companies have not met the existing threshold of 49%. “Members have asked, isn’t there enough money in this country? There are also enough borrowers. So enough is not enough,” she said.
She also brushed away the criticism of not enough consultations with stakeholders before bringing in this Bill saying the Insurance Regulatory and Development Authority had spoken to 60 firms and other private players.
