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Insurance bugbear makes parties in power run for cover

Amberish K Diwanji in New Delhi

The Bharatiya Janata Party-led alliance government introduced the Insurance Regulatory Authority bill and immediately referred it to a parliamentary committee. This almost certainly means there is little chance of the IRA bill being passed in this session of Parliament. It may not even be passed in the next session.

The move to send the bill to a committee became inevitable after the Congress party, at a meeting yesterday chaired by Sonia Gandhi, declared that it wanted the bill referred to a committee. The other Opposition parties are also against the IRA bill that seeks to allow private companies, including those with minority foreign equity, into the insurance sector. And without the backing of the Congress, considered pro-reform, the bill has no chance of ever being passed.

Incidentally, the BJP's decision to introduce the IRA bill pitted the party against its affiliates such as the Rashtriya Swayamsevak Sangh, the Swadeshi Jagran Manch and the Bharatiya Mazdoor Sabha, all of whom had condemned the government's move to introduce the bill. The RSS, which is holding its annual session in Nagpur, even warned the government not to take its support for granted vis-à-vis the insurance bill, while the SJM and BMS held a protest rally in New Delhi.

Moreover, many BJP members of Parliament too had declared their opposition to the IRA bill. However, Prime Minister Atal Bihari Vajpayee had categorically stated last week that the IRA bill would be introduced, regardless of dissenting voices. At that time, the Congress was clearly expected to support the bill, even though a section of the party was against it.

However, the first indication that the Congress might not support the bill came during the nationwide industrial strike. Congress leaders Sharad Pawar and P Shiv Shankar participated in a rally held outside Parliament House wherein a call was made to oppose the insurance bill. On the same day, insurance workers throughout the country went on strike and had flayed the move to introduce the bill.

An insurance expert with a business chamber wondered whether there was a marriage of convenience between the BJP and the Congress to stall the bill with both sides worried about its political implications. Suspicion lingers that both parties fear angering the country's 4.3 million public sector workers who are still against privatisation.

The expert added that much would depend upon the deliberations of the committee. "One hopes the panel quickly debates the issues such as paid-up capital of Rs 1 billion and foreign participation, and returns the bill to Parliament in the Budget session. After all, the Budget session is just 60 days away. But if they don't, then there will be reason to believe that the government and the Opposition are not serious about reforming the insurance sector," he added.

The Confederation of Indian Industry, which has been demanding the opening up of the insurance sector, did not comment on the government's move. "There are some gray areas that need to be ironed out," said CII deputy director Manushi Roy, "such as the foreign participation percentage and the paid-up capital."

Another bone of contention is that while industry has demanded that the Insurance Regulatory Authority be autonomous, the bill places it under government control. "We have clearly demanded that the IRA should be an autonomous body to ensure fairness to all and this specifically must be resolved by the select committee," stated Roy.

Regarding foreign participation, the bill seeks to allow foreign equity up to 26 per cent, plus another 14 per cent for non-resident Indians; the remainder to be held by Indian firms only. Incidentally, while the unions and the left parties are against privatisation per se, the RSS and Swadeshi Jagran Manch welcome opening the insurance sector to private Indian companies but oppose foreign participation.

It was the Congress that first mooted the idea of opening up the insurance sector, but after vehement opposition to the idea surfaced from everyone else, the subject was dropped like a hot potato. Later, finance minister in the United Front, Palaniappan Chidambaram, bravely attempted to steer the bill through the Lok Sabha, but gave up in the face of a determined opposition, which then included the BJP.

On coming to power, the BJP changed its position on the insurance bill even as many of its MPs opposed the move. But with the Congress developing cold feet, it is now anybody's guess whether this bill will ever become law.

Business News