MR. DEPUTY-SPEAKER: The reply to the clarifications asked by the hon. Members will be given by the hon. Minister after the lunch break. Now, the House stands adjourned to meet at 2.30 p.m.
The Lok Sabha then adjourned for Lunch till thirty minutes
past Fourteen of the Clock.
The Lok Sabha re-assembled after Lunch at thirty-one minutes
past Fourteen of the Clock.
(Mr. Deputy-Speaker in the Chair)
THE MINISTER OF FINANCE (SHRI YASHWANT SINHA): Mr. Deputy-Speaker, Sir, a number of issues have been raised and a number of clarifications have been sought by various hon. Members of this House. I would endeavour in my brief reply to cover as many of them as possible.
I will begin by once again putting at rest any speculation, any apprehension and any fear in regard to the status of the LIC and the GIC and in regard to the workers losing their jobs.
SHRI SOMNATH CHATTERJEE (BOLPUR): Sir, I do not understand this assurance. How can the Government assure as to how many jobs they would have and as to how many employees they would have?
SHRI YASHWANT SINHA: Sir, I am giving this assurance on the basis of my understanding that the LIC and the GIC are not going to lose business in the new situation and that they are only going to expand their business. Therefore, the question of their workers being threatened with loss of job opportunities does not arise. I welcome the suggestion made by Shri Sudip Bandhopadhyay that just as we have talked to the management we should talk to the workers also. I would like to assure him that I personally have talked not only to the management but also to the workers and we would keep up the dialogue with the workers so that any fear or apprehension in their mind is fully addressed, taken care of and removed. So, there is no difficulty in regard to that.
Now, in regard to the equity cap of the 26 per cent, Shri Madhavrao Scindia and some other friends have raised this issue as to whether we are fully protected by the provisions of this Bill. I would like to read the definition that we have given for the Indian Insurance companies. We are clearly saying that it is the company registered under the Companies Act of 1956 in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominiees, do not exceed 26 per cent of the paid up capital of such Indian companies. I would like to clarify here that there is no danger of this cap being crossed.
I have given the definition of the Indian company in the IRDA Bill. Now the meaning of the word "nominee" is fairly wide. I have also consulted legal experts and I have been assured that the meaning of the word "nominee" is fairly wide.
Some hon. Members have also raised the issue of non-corporate persons like NRI, trusts, etc. finding their way to make investments which may not be covered by the existing provisions. Sir, I am informed that the existing guidelines under FIPP will adequately take care of this problem also. I would like to assure this august House that the Government has been alive to the possibility of misuse of the provision of the Bill and breaching the limit by adopting dubious method. Adequate care has been taken in drafting these provisions and in due course the authority will publish necessary guidelines to be followed in this regard which will be applicable to all those who apply for the licence. The Authority will keep a close watch on the companies and ensure that the provisions are fully adhered to.
While on this point I would like to say that what we are creating is a statutory and a strong Authority. So, all those fears that pre-1956 situation will be created or whatever has happened in some other countries abroad will be created are not well-founded. It is because we have a strong Authority which is going to take care of this problem. The Authority has the powers to impose fines which through the amendment that I am circulating as suggested by the hon. Members of the Congress Party is being raised to Rs.25 lakh with threat to cancel the licence. The authority can suspend or cancel the registration in case of failure; the authority can appoint Additional Directors and call for any document; can inspect a document and provide such directions as necessary in the interest of the policyholders. The authority is an autonomous, experienced and expert body. I am absolutely confident and I have no hesitation in assuring this House that the Authority will be able to discharge the responsibilities which are being cast upon it.
SHRI MADHAVRAO SCINDIA : I am sorry I came in, while you were half way through. So, I may have missed some very central points. What I intended to say here is that the word "nominee" is wide enough to cover many categories. But a nominee means, he becomes a nominee when he is nominee of somebody else. But if somebody invests on his own volition whether he be an NRI or a foreign citizen or foreign cooperative society or foreign group of persons or foreign trust, he need not necessarily be a nominee of anyone, he does not come under the cover of the word "nominee". It is because he never becomes a nominee. Therefore, if that is the case, which you have checked with your legal opinion, I would suggest you to tighten it up.
SHRI SOMNATH CHATTERJEE : Sir, after all it is a law which is being made. How can guidelines or any direction by the Regulatory Authority change the law? The law itself permits here. Once this Bill is approved and passed, it becomes a law of the land which restricts 26 per cent only to foreign company either by itself that is, by company itself or through its subsidiary companies with a well known concept or its nominees which means company's nominee. An individual need not be a company's nominee. Therefore, foreigners can invest here. So, Shri Scindia's objection is right. Merely saying that the Authority will ultimately look after the interest of the country is no solution. It is because the law operates over any guidelines.
SHRI MADHAVRAO SCINDIA : There are categories which are covered under the Foreign Contributions Act. You cover everything. So, why do you not just incorporate that into the body of the Bill?
SHRI YASHWANT SINHA: Sir, the intention of the law and the intention of the Government is to limit foreign equity participation to 26 per cent.
In any interpretation of any law, as is the general practice, whenever a court is seized of the matter, the discussions in the Houses of Parliament, the assurances given by the Government are all taken care of, they are all taken into account while interpreting the law. Now I am making it very clear that the intention of the Government is to restrict it to 26 per cent. This is the intention that we had conveyed to those who drafted the legislation and I have been assured that these words sufficiently cover the concerns that we have in this regard.
The other point that I would like to make is, India is not yet such an open country where any individual, anybody can come and make investment anywhere. We have not reached that stage. There are restrictions. We are considering this law within the overall framework of the entire legal system which operates in this country. Nobody is free to come and invest anywhere. That is why I hastened to add that the Regulatory Authority will clarify this. In any case, Indian companies will have to apply to the Regulatory Authority for registration. No company can start business without the permission of the Regulatory Authority. This is the time when we will have to look at it. The functioning of the company is something which will be watched closely by the Regulatory Authority for which there is adequate provision in this Bill. Therefore, to think that it will be a free for all and anybody can take advantage of any perceived loophole is something I do not think is correct.
SHRI MADHAVRAO SCINDIA : Ultimately, a few years down the line, all the commas, full-stops and what is in print will be read. The gentlemen who are advising you have explained it to you on the basis of nominee.
SHRI SOMNATH CHATTERJEE : The hon. Finance Minister cannot give a meaning which he wants. Words have their own meanings. A nominee cannot be anybody and everybody. The hon. Member is right.
1442 hours (Mr. Speaker in the Chair)
SHRI MADHAVRAO SCINDIA : Please examine it and bring it again after an hour or so. By the time you complete, you can bring in another amendment. Your objective has to be fulfilled. It is very dangerous. Because you may find that foreign sources come in who have much above 26 per cent, who can go even up to 51 per cent, if not more and take control of the whole situation. I would request you to pay serious attention to this.
SHRI YASHWANT SINHA: There is absolutely no danger of that. Nobody can misinterpret this law and the provisions of this law. After all, I also have taken legal opinion. What I am saying in this House is based on expert legal opinion which is available to the Government. I have been assured that this is covered adequately in the way the whole clause has been drafted. It is on that basis that I am here to assure the House that there is danger of the 26 per cent being breached. I will stand by this. I am saying that the Regulatory Authority is there to take care of any problem which might arise. If, at a future date, there is some interpretation, something happens, there have been occasions when we have revised our laws. Whenever something has gone wrong and the Legislature's intention has not been properly understood by courts, we have come back to the House and revised. That option is always open to the Government.
The other issue which has been raised especially by my friend Shri Kirit Somaiya who has expressed some concern in that regard is about the existing agents. I am aware that over five lakh agents are working for procuring life insurance business. I gather that the interim Regulatory Authority has already discussed the issues concerning qualifications, training, etc., that the representatives of the associations of the agents and adequate protection and care have been ensured for the present agents. Therefore, let me assure this House that any model regulation issued by the Regulatory Authority in regard to agents will protect and safeguard the interest of the existing agents. Their interests will not be compromised in any manner.
SHRI PRAKASH PARANJPE (THANE): The present rule says that within three years they must get through 12th standard and a training. This should be omitted. I have given an amendment to that effect. The present rule does not provide for that. They are asking them to complete 12th standard within three years.
SHRI YASHWANT SINHA: I made a distinction between existing agents and new agents who might come into the field. As far as the existing agents are concerned, I am giving this assurance that their interest will not be compromised and it will be fully protected.
Now, some Members have asked about investor protection fund. We do not need an Investor Protection Fund. In this particular case, every new entrant and a new company are required to deposit Rs.10 crore with the Reserve Bank as a security deposit. This will be the nucleus of a future protection fund and after the sector is opened, we can consider creation of an investor protection fund which has to be made creative out of the levies received from the companies. So, on that score, let there be no doubt.
Some Members have expressed apprehension about capital flight by opening up of the insurance sector. Their contention is that the foreign promoters will take away the Indian policy holders' funds. This is an unfounded fear. Under Section 27(c) of the Bill, no insurer can directly or indirectly invest the funds of the policyholder outside India. The law is very clear. Only dividends can be taken abroad by policy investors subject to normal regulations. In this connection, I may also mention that such dividends will accrue only after seven to eight years, from the date on which the company begins its operations. Further, as business expands, there will be growing requirements of solvency margins and therefore, more and more capital will come in rather than go out of the country...(Interruptions)
SHRI MADHAVRAO SCINDIA : Section 27(c) should be totally watertight. I am giving you a constructive suggestion....(Interruptions)
SHRI YASHWANT SINHA: The only assurance that I would like to give to the Members is that we are making some amendments. Let us go ahead and see how the Act operates. Nobody can say the last word on any subject at any point of time. I remember the quotation of Shri Chandrashekhar that everybody is a semicolon; there is no full stop in history. So, there are no full stops. We will look at the situation and see how it can be developed.
The point which was raised by Shri Somnath Chatterjee is about how the business will expand. A rough assessment has been made. The insurance business which has been discussed in this House was about the total insurance premium as percentage of GDP. I would like to inform Shri N.D. Tiwari that it is not two per cent of the coverage of the population, it is two per cent of the GDP in terms of the insurance policy. It was 2 per cent in 1997-98. Some rough calculations have been made. By 2000-2003, this figure is expected to go upto 4.5 per cent of the GDP considering that in this span of five years, there would be a considerable and significant expansion of insurance business. So, let there be no doubt about that.
In terms of the LIC, GIC and level-playing field, the GIC and LIC operate in 27 countries. They already have 52 branches, subsidiaries, representatives and associate companies in 27 countries. Therefore, as I said in the beginning, we should not be scared. If GIC can operate in Singapore, the UK, Thailand, Philippines and Saudi Arabia, compete and hold on their own, then there is no reason why they cannot hold on their own on our own soil? Therefore, if we talk in terms of level-playing field, the level-playing field demands that we should not be scared of the future prospects of LIC and GIC.
With this, I suppose that I have covered most of the issues which have been raised by Members.
SHRI RUPCHAND PAL (HOOGLY): What about under-cutting?
SHRI YASHWANT SINHA: There is no danger of any under-cutting. If you sit here and imagine that there is ghost behind every pillar, I cannot help you.
But let us remember that India is a strong and powerful country and no country in the world, no company of any foreign country can take this country for a ride. Let us have confidence in ourselves. Why are we so lacking in confidence that they will come and take away everything? Nobody can do it. They have not been able to do it in the banking sector. They will not be able to do it in the insurance sector. Therefore, I suggest that let this Bill be passed with acclaim by the House. I would request the hon. Members in the middle to kindly withdraw their objections to the passage of this Bill.
MR. SPEAKER: Now, we shall take up the Motion for consideration of the Bill. There are some amendments moved to the Motion.
I shall now put Amendment No.1 moved by Shri Ajoy Chakraborty to the vote of the House.
The amendment was put and negatived.
MR. SPEAKER: I shall now put Amendment no.3 moved by Shri Basu Deb Acharia to the vote of the House.
The amendment was put and negatived.
MR. SPEAKER: I shall now put Amendment No.4 moved by Shri Basu Deb Acharia to the vote of the House.
The amendment was put and negatived.
MR. SPEAKER: I shall now put Amendment No.14 moved by Shri Rupchand Pal to the vote of the House.
The question is:
"That the Bill to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972, be referred to a Joint Committee of the House consisting of 15 Members, 10 from this House, namely:-
(1) Shri Basu Deb Acharia
(2) Shri Moinul Hassan
(3) Smt. Geeta Mukherjee
(4) Shri Sanat Kumar Mandal
(5) Shri Amar Roy Pradhan
(6) Shri P.H. Pandian
(7) Shri Yashwant Sinha
(8) Shri Raghuvansh Prasad Singh
(9) Shri Mulayam Singh Yadav
(10) Shri Rupchand Pal
and 5 from Rajya Sabha;
that in order to constitute a sitting of the Joint Committee the quorum shall be one-third of the total number of Members of the Joint Committee;
that the Committee shall make a report to this House by the last day of the Budget Session;
that in other respects the Rules of Procedure of this House relating to Parliamentary Committees shall apply with such variations and modifications as the Speaker may make; and
that this House do recommend to Rajya Sabha that Rajya Sabha do join the said Joint Committee and communicate to this House the names of 5 Members to be appointed by Rajya Sabha to the Joint Committee." (14)
Those in favour will please say `Aye'.
SOME HON. MEMBERS: `Aye'.
MR. SPEAKER: Those against will please say `No'.
SEVERAL HON. MEMBERS: `No'.
MR. SPEAKER: I think the `Noes' have it. The `Noes' have it.
SHRI RUPCHAND PAL (HOOGLY): No, Sir. The `Ayes' have it. (Interruptions)
SHRI SOMNATH CHATTERJEE : Mr. Speaker, Sir, why should we give up our right if the Government wants to go posthaste in this matter? They are not prepared to listen to very important suggestions made by everybody. Patriotism is nobody's monopoly; wisdom is nobody's monopoly. (Interruptions)