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Govt sounds Left parties on dumping insurance FDI hike

Sarbajeet K. Sen

New Delhi , July 22

THE proposal to hike foreign direct investment (FDI) cap for the insurance sector could be the first casualty in the ongoing political battle over FDI with the Government understood to have expressed its willingness to the Left parties to put the move on the backburner.

Senior leaders of Left parties who have been opposing the sectoral FDI hikes announced in the Budget said that the Government had sounded them out on its willingness to dump the proposal for the insurance sector.

"We have been made to understand that the bill to amend the insurance laws to give effect to the FDI hike is not coming," a leader of one of the Left parties told Business Line.

However, the discussions have been limited at the political level with officials claiming no knowledge about such a move. "I have no such information," a senior Finance Ministry official said.

The willingness to climb down on the insurance FDI front could be seen as the tactical move by the ruling United Progressive Alliance (UPA) Government to start off a process of negotiation to arrive at a face-saving consensus whereby it would be allowed to go ahead with raising FDI limits for the other two sectors - telecom and aviation.

Besides wanting to raise the insurance cap to 49 per cent, the Finance Minister, Mr P. Chidambaram, had proposed to hike the telecom FDI to 74 per cent from the current 49 per cent and in aviation from 40 per cent to 49 per cent.

However, taking a tough stand on the issue, the Left parties have said that they would not be willing to enter into any negotiations and would instead want to see a complete reversal of proposals for all three sectors.

The UPA alliance can ill-afford to rub the Left parties the wrong way as they provide the crucial outside support essential for the Government's survival.

The modalities of hiking the insurance FDI is unique among the three sectors since unlike the other two it would require a legislative amendment.

The Left's support is an absolute must if the Government has to successfully steer any such proposal in Parliament.

The Opposition parties, including the BJP and the Samajwadi Party have also said that they would vote against any move to tamper with the insurance cap. Hike in the limit for telecom and aviation can be done through executive action.

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