Parliament proceedings | Lok Sabha passes Insurance (Amendment) Bill to raise FDI limit to 74%


Finance Minister Nirmala Sitharaman said that apprehensions over the gradual taking over of public sectorĀ insuranceĀ companies was ill-founded

The Lok Sabha on March 22 passed TheĀ InsuranceĀ (Amendment)Ā Bill, 2021 which seeks to raise the limit for Foreign Direct Investment (FDI) inĀ insuranceĀ companies from 49% to 74%. TheĀ BillĀ had earlier been cleared by the Rajya Sabha and now requires presidential assent to become law.Ā 

Finance Minister Nirmala Sitharaman, who piloted theĀ BillĀ in both the Houses, said that the move was aimed at solving some of the long term capital availability issues in theĀ insuranceĀ sector which was a capital-intensive industry. She added that stakeholders had been consulted by theĀ insuranceĀ regulator,Ā InsuranceĀ Regulatory and Development Authority of India (IRDAI) before going ahead with the move. In her response to the debate on theĀ BillĀ in the House, Ms. Sitharaman said that apprehensions over the gradual taking over of public sectorĀ insuranceĀ companies was ill-founded, as the banking andĀ insuranceĀ industry has been designated as strategic sectors and that the 74% cap is just a limit posed on the FDI.Ā 

She pointed out that the high solvency fund ratio in the sector has led to liquidity stress in the sector and that theĀ BillĀ will address that stress. ā€œGovernment can help public sector firms but private companies will have to find ways of raising money,ā€ she said.Ā 

Replying to Congress MP Manish Tewariā€™s stated apprehensions that the public sector undertakings were going to be disinvested and that it was ā€œakin to selling the family silverā€ she said that it was not, and the previous UPA government had also pushed for raising the FDI limit. ā€œNobody is taking the money outside India, theĀ BillĀ has safeguards that some of the profit has to be invested within the country,ā€ she said responding to the debate. She said theĀ BillĀ was about right-sizing the public sector and unlocking assets.Ā 

She asserted that public sector employees will be protected and the measure will also give a fillip to private employees. ā€œThere are 2.67 lakh employees in the private sector inĀ insuranceĀ as against 1.54 lakhs in the public sector. Around 15 lakhĀ insuranceĀ agents in the public sector as against 21 lakh in the private sector, there are seven public sector companies, while 61 exist in the private sector and money should be available to them to do business,ā€ she said.

Congress MP Jasbir Singh Gill said that raising the limit for FDI inĀ insuranceĀ not advisable and that the safeguards in theĀ BillĀ would be as useful as the ones that kept out the East India Company. ā€œOwners and owners and employees are employees, even if they are Indian employees,ā€ he said.

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