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Blow to reforms as insurance bill is withdrawn

The government was on Wednesday forced to withdraw the insurance regulatory authority bill due to the stiff resistance from the Left parties, and the Bharatiya Janata Party and its allies.

The bill, seeking to establish a regulatory authority for the insurance sector, was moved by Finance Minister Palaniappan Chidambaram in the Lok Sabha on Monday.

Despite his assurance while replying to the debate on the bill that there was no move to privatise the insurance sector, the Left parties tried to move an amendment seeking that foreign and private parties would not be allowed to enter the sector.

Prime Minister Inder Kumar Gujral, who was present in the House, when the bill was in the third stage, asserted that the government followed the policy of consensus and if the members so desired, the government was ready to withdraw the bill.

Earlier, the finance minister made an unsuccessful bid to pacify members by suggesting that the government was prepared to bring in an amendment, which would provide that only Indian companies would be allowed to operate in the country.

This proposal also did not satisfy members, who said that the government had to clarify its stand whether an Indian company, having foreign partners, could also enter the insurance sector.

As the House assembled, several members including former prime minister Chandra Shekhar and Guman Mal Lodha, the mover of the amendment, expressed their concern over the speaker ruling abruptly adjourning the House at 1340 hours IST for lunch.

Both George Fernandes (Samata Party) and Chandra Shekhar alleged that the government appeared to be under pressure from foreign countries to open the insurance sector.

Leader of the Opposition Atal Bihari Vajpayee said that the government should have brought the bill after consulting all political parties.

He said his party had clearly informed the government that the BJP was not opposed to the entry of Indian private companies, but they were definitely opposed to the entry of foreign companies in this important financial sector.

Earlier, Chidambaram had told the Lok Sabha that the question of opening up the insurance sector to Indian private companies and multinationals was premature.

He opposed the amendments moved by the Left and BJP that no foreign or private company should be allowed to do business in the insurance sector, and said he had allowed only select Indian companies for the medical insurance sector.

The government has no proposal to allow any foreign company or multinationals in the insurance sector and had provided only for a modest opening in the health insurance sector, he said.

He also assured the lower house of Parliament that there was no move to privatise the life and general insurance or to allow foreign or private Indian insurance companies in this sector.

Replying to the debate on the insurance regulatory authority bill, Chidambaram said there was no proposal to supersede any other law already in force. He pointed to Section 30 of the Life Insurance Act 1912 and Section 24 of the General Insurance Act 1938 which specifically prohibit privatisation, and said the government was not doing anything in derogation of those laws.

The minister said the aim of the present bill was only to set up a multi-member statutory regulatory authority. Fears about achieving anything else through this bill, he said, were ''misplaced and premature.''

Both the life insurance and general insurance will remain in the public sector, he maintained.

The minister pointed to sections 13 and 26 of the proposed bill and said it was clearly stated therein that the bill would be subject to, and not in derogation of, any other law already in force.

He said the present move was only part of the restructuring of the insurance sector, as promised in the United Front government's common minimum programme .

However, he said he was aware of the position of the Left parties which were opposed the entry of the private sector into insurance, the BJP which was opposed to the entry of foreign or multinational companies, and the Congress which was cautiously opposed to privatisation. Therefore, he would bring forward any reforms only after building a consensus in the government and the House.

Foreign insurance companies in the country had only been permitted to open liaison offices and not enter the life or the general insurance sector, he pointed out.

The minister admitted that he had at one time proposed opening the health insurance to the Indian private sector, but this was only a proposal and any move to make this into law would only be with the consent and consensus of the House.

At the outset, Chidambaram said the present bill was only in pursuance of the recommendations of the Malhotra Committee, which, in its report, said the interests of the insuring public need to be protected and hence the need for a regulatory body with full statutory powers.

The minister, who was continuously interrupted during his speech, said the aim of the bill was to promote and ensure orderly growth of the insurance sector.

He did not respond to several members including Basudeb Acharya and Nirmal Kant Chatterjee (both Communist Party of India-Marxist) that the minister should give a categorical assurance that there will be no privatisation of the insurance sector at any time in the future.

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