INDIA INSURANCE

In the latest twist to the fate of India's long-protracted insurance amendment Bill that proposes to raise the foreign investment ceiling in insurance companies from 26% to 49%, the Upper House of Parliament, the Rajya Sabha, is expected to refer the Bill to a Select Committee for further scrutiny.

The Upper House, in which the ruling National Democratic Alliance (NDA) is in a minority, is expected to send the Insurance Laws (Amendment) Bill 2008 to the panel before the current session of Parliament ends on 14 August, reported the Livemint news website citing a minister who spoke on condition of anonymity.  A Select Committee is made up of members from political parties in proportion to their strength in the House.

The move would delay any vote on the Bill till the end of the year when the Upper House sits its winter session. The amendment Bill is seen as a litmus test of the NDA’s resolve to implement crucial economic reforms since it won the majority in the Lower House in the national election in May and formed the government. Its delay casts doubt on other reforms that the new government is proposing, including labour reform.

The government could not take the legislation forward as the Congress, the largest party in the Rajya Sabha, insisted that it be referred to a Select Committee for the panel to study it and suggest changes. Congress claims to have not less than 154 votes in the House as at least 11 parties back its position. The Bharatiya Janata Party (BJP) that leads the NDA, and its partners have 70 members in the 242-member Rajya Sabha.

The Congress Party says that it wants clarifications on Indian ownership and control of insurance companies. The Bill states that the proposed 49% ceiling will be a composite investment cap that will include both foreign direct investments and portfolio investments, but with a rider that insurance companies will be owned and controlled by Indian partners.

Any changes suggested by the Select Committee will be binding on the government.

The government is expected to formally announce the decision to constitute the Select Committee this week. The Bill, which would have been tabled in the Upper House last week but for the Congress Party's insistence on its scrutiny by a Select Committee, has been delayed since 2008.