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Uncertainty shrouds insurance bill's fate; Malkani sees foreign pressure on govt

Amberish K Diwanji in New Delhi

Although the Bharatiya Janata Party-led alliance government is all set to introduce the bill to reform the insurance sector, it is still not clear whether the bill will be passed in this session. The government is under intense pressure from within its ranks in the BJP not to pass the bill.

The Insurance Regulatory Authority bill seeks to open up the insurance sector, hitherto controlled by a few government-run companies, including the behemoth Life Insurance Corporation. The bill will allow private companies to set up insurance firms and offer life, health and general insurance to the people.

The bill has run into trouble over the question of the percentage of foreign equity in Indian insurance companies. Earlier the government was planning to allow foreign equity up to a maximum of 40 per cent. This meant 26 per cent foreign equity stake, besides 14 per cent by way of overseas commercial borrowings or Non-Resident Indian participation.

However, after the Swadeshi Jagran Manch, an organisation opposed to liberalisation, and the Bharatiya Mazdoor Sangh, a trade union, held a rally opposing the entry of foreign firms in the country's insurance sector, the government buckled. Now, the BJP-led government is likely to cap total foreign investment, whether by way of equity or borrowings, at 26 per cent, while allowing NRIs to pick up another 14 per cent.

Incidentally, the BJP, the SJM and BMS are all affiliated to the Rashtriya Swayamsevak Sangh, often seen as the organisation that directs the BJP on policy issues. The RSS is known not to be too happy with the BJP's plan on allowing foreign participation in the insurance sector.

What, however, is worrying the BJP even more is the fact that a 76-member segment of its members of Parliament is strongly opposed to the insurance bill and has even declared that it may vote against the bill when introduced in Parliament. The BJP has 161 members in the Lok Sabha.

A leading figure among those opposed to the bill is K R Malkani, the BJP ideologue and a member of the Rajya Sabha. Others opposed to the bill include BJP Minister of State for Human Resources Development Uma Bharati, general secretary and former Himachal Pradesh chief minister Shanta Kumar, and parliamentarians Sumitra Mahajan, V P Goel and Gautam Sanpriya.

Malkani was doubtful if the bill would be passed even if introduced. "The government may introduce the bill since it has given an assurance on this matter, but after doing so, it may simply refer the bill to a select committee of Parliament, comprising members from all parties. The select committee may well take months, even years, before it finally sends the bill back to Parliament," he said.

The senior BJP leader said he is sure that the BJP would not issue a whip to all its members in Parliament to vote for the bill. "With so many of us against the bill, it seems highly unlikely. I don't even think it will reach that stage," he added.

However, a BJP source said if at all the government decided to ensure the bill's passage, then it would certainly issue a whip rather than face the risk of an embarrassing defeat.

Malkani was also certain that the bill would never be put to vote in the House. "If all members are asked to vote freely, the bill will face certain defeat," he said, "not just many of us in the BJP, but also members of the Communist parties and other socialist parties will oppose the bill. Only the Congress is all for the bill."

Incidentally, the Congress is likely to support the bill if introduced in Parliament. The party's top leadership has indicated as such. However, even key BJP allies in the government such as the Shiv Sena and the Samata Party have expressed doubts on the bill.

When the then finance minister, Palaniappan Chidambaram, had introduced the bill in the Lok Sabha in 1997, the BJP has strongly opposed the bill, forcing the embarrassed government to withdraw the same.

"How can the BJP today support the same bill that we had opposed when we were in the Opposition and which we had then said was against the national interest," asked a distraught Malkani. "With what face will the MPs go to the electorate on this change of stance?"

It is this fear of switching support that is haunting BJP MPs, especially after some members of the Sangh Parivar and its affiliates have clearly stated that they would expose those MPs who voted for the bill in their respective constituencies.

Malkani suspects strong foreign pressure, especially from the United States, on the present government that is forcing this changed position. "The Western powers have been after us ever since liberalisation began in 1991 to open up the insurance sector. They have put pressure on the Congress, the United Front and now on the BJP. However, P V Narasimha Rao knew the bill would be defeated and hence never introduced it, and the UF withdrew it."

To buttress his point, Malkani points out how the insurance sector was reformed in Pakistan. "There was an interim government in Pakistan headed by Moeen Qureshi to oversee the election. Qureshi was an ex-World Bank official and he opened up the sector during his brief rule. No government would have done that," he said.

According to Malkani, foreign insurance firms are in deep trouble and hence desperate for new markets. "Last year alone 300 insurance companies failed worldwide, which actually means the West since most are based there. That is why they are asking their governments to put pressure on India to allow them in," he stated.

Malkani also blasted the Reserve Bank of India for allowing four foreign insurance companies to open liaison offices in India before Parliament had allowed them into the country. "Under whose authority did the RBI give these firms permission to open offices here?" he asked.

The BJP leader added that while he and his colleagues were against foreign participation, they were not against privatisation of the insurance sector. "The insurance sector must be opened up, but only to 100 per cent Indian companies. We'd welcome that," he concluded.

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