New Delhi: The UPA government on Thursday came up with its second wave of big bang reforms as the Cabinet cleared the introduction of foreign direct investment (FDI) in pension and increase in the FDI cap in insurance.
Addressing a press conference over the measures, Union Finance Minister P Chidambaram said that the cap on the FDI in pension would be linked to that in insurance. It means that if the FDI cap in insurance is approved at 49 per cent, then that in pension will also be 49 per cent.
The Finance Minister further said that the UPA government would engage all the political parties to the insurance, pension bills passed. Currently, no foreign investment is allowed in the pension sector and only 26 per cent FDI is allowed in insurance.
Explaining the decision taken by the government, Chidambaram said that private companies will benefit from the amendments in the insurance bill as they were not applicable on the public sector players.
Referring to some other major decisions by the government, the Union Finance Minister said that the Cabinet had approved the revision of rate of risk allowance, hospital care allowance and patient care allowance.
The Cabinet also approved the declaration to of five airports as international. Besides, the agenda on Companies Bill and Competition Act were also approved by the Cabinet.
Meanwhile, the insurance sector welcomed the move to increase FDI cap. "This is a very good move and it will give a boost to the industry," said ICICI Pru Life ED Puneet Nanda.
"This is a very positive move as far as sentiments are concerned," said Future Generali MD and CEO Deepak Sood. Similar comments were echoed by IDBI Federal Life CEO Nageswara Rao who said that the move fulfilled the long standing demand of the industry.
Meanwhile, the Trinamool Congress was quick in attacking the government over the move with party MP Saugata Roy saying they will oppose it in Parliament.
"We need to see what way they bring it in Parliament. There is a certain way to oppose if it is a bill, and there is a certain way to oppose if it is a resolution. We will oppose it," said Roy.
The Left also hit out at the government over the move. CPI leader D Raja called the government "shameless", saying it was "desperate" and "moving towards right wing economic policies".
"We do not have social security network in India, you cannot risk the life long savings of people...we will continue to oppose the move. This is a World Bank-directed move. It is going to be disastrous," said D Raja.
He further said, "The government is desperate. The Prime Minister wants to please international finance capital by taking such measures...the government is shamelessly biased in favour of multinational companies."
The main Opposition party, the Bharatiya Janata Party (BJP) said that the Congress-led UPA had "suddenly changed". The party, however, said that it would wait for the fineprint on the reforms to give a detailed response.
To push the bills, the government needs simple majority in both houses from those members who are present and voting in the house. With Mamata Banerjee's Trinamool Congress gone, the government is dependent on SP and BSP for bailout. At the moment, UPA has 252 seats in the Lok Sabha and is a minority government.
Even as the Bharatiya Janata Party (BJP) has assured support to the government on pension bill, this could be jeopardised by the government going for 49 per cent FDI in insurance.
The Samajwadi Party, Bahujan Samaj Party and Biju Janata Dal are also opposed to it while the Trinamool Congress and the Left have said that they will defeat the bills in Parliament.