Within 24 hours of the Winter session of Parliament coming to a close, the Centre approved ordinances for hiking foreign direct investment (FDI) to 49 per cent in the insurance sector as well as kicking off the coal block auction process.
Due to continuous disruptions, the Rajya Sabha could not take up the Insurance Laws (Amendment) Bill, which prescribes higher FDI besides other provisions. The higher limit can bring up to $8 billion for the fund-starved Indian insurance industry, which needs ₹60,000 crore in the next five years.
“The ordinance demonstrates the firm commitment and determination of this Government to reform. It also announces to the rest of the world, including investors, that this country can no longer wait even if one of the Houses of Parliament waits indefinitely to take up its agenda,” Finance Minister Arun Jaitley told reporters.
When asked about the need for an ordinance, which is normally promulgated in a situation of ‘urgency’, Jaitley said “Already, there is too much delay, which is why there is urgency.”
The Bill has been pending in the Rajya Sabha since 2008. The Standing Committee of Parliament approved the Bill. Thereafter, during the Budget session in July, the Rajya Sabha constituted a select committee to vet it, which approved it with some modifications. “The ordinance is verbatim in terms of the recommendations of the select committee of members who represent an overwhelming majority in both the Houses of Parliament,” he said.
Composite capOne of the key modifications, as recommended by the committee, talks about the 49 per cent limit as the ‘composite cap’. This refers to all kinds of foreign investments – FDI and foreign portfolio investment (equity investment by foreign institutional investors, or FII, qualified foreign investors, or QFI, and sub account).
Composite investment also refers to either 49 per cent FDI or FPI or a combination of both. In case of combination, FPI cannot be more than 24 per cent.
While FDI investment is possible in both listed and unlisted companies, FPI will be possible only in a listed company.
An ordinance has the same power as an Act. Based on the urgency, it can be promulgated in between two sessions of Parliament. However, the Government needs to get it converted into Act in the next session of Parliament, failing which it lapses.
So, what happens, if the Rajya Sabha does not pass the Insurance Bill in the Budget session next year?
“Stalemate and obstructionism can’t go on in perpetuity. There is a constitutional remedy and, as I said, even if one of the Houses fails to take up agenda and does not proceed further, the nation cannot wait,” Jaitley said.
There is no limit to the number of times the ordinance can be re-promulgated.
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