New Delhi, Dec 24: Government on Wednesday approved promulgation of an Ordinance to hike Foreign Direct Investment (FDI) cap in the insurance sector to 49 per cent from 26 per cent and holding auctions for coal blocks, as the legislation could not be passed in the Parliament session that ended yesterday.
"The Cabinet has cleared the Ordinance on insurance sector," sources said after the meeting of the Union Cabinet headed by Prime Minister Narendra Modi here.
The 49 per cent cap would include both FDI and foreign portfolio investments. The proposed hike in foreign investment limit to 49 per cent in the insurance sector has potential to attract up to $7-8 billion (about Rs 50,000 crore) from overseas investors, giving a major boost to the segment.
The total capital deployed in the private life insurance sector is close to Rs 35,000 crore. At FDI at 26 per cent, foreign equity is close to Rs 8,700 crore. The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion despite being approved by the Select Committee of the Upper House because of the uproar by opposition parties over the conversion and other issues.
The government has blamed political obstructionism for the disruption of Rajya Sabha, where the ruling NDA does not have a majority. There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general insurance business. In addition, GIC is the sole national reinsurer.
The ordinance on coal is necessary for the government to hold auctions for the blocks that were ordered cancelled by the Supreme Court, while that on insurance will operationalise the reforms in the sector, the bill for which had been okayed by the Select Committee of the upper house.