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Insurance bill setback forces govt to moot alternative revival plan

George Iype in New Delhi

The Atal Bihari Vajpayee government's decision to refer the controversial Insurance Regulatory Authority bill to the joint select committee of Parliament has forced the finance ministry to chalk out alternate economic packages to instil confidence in foreign investors and to spruce up the image of the government.

Prompted by the Congress's reluctance to openly support the bill, the government on Tuesday left it to the joint committee thereby ensuring that the bill could be passed only during the Budget session.

After the debacle in the November state assembly elections, the Vajpayee government was banking on the IRA bill in an effort to display to the outside world the Bharatiya Janata Party's commitment to foreign investment and economic reforms.

Finance ministry officials said since the government's determination to accelerate economic reforms and lure foreign investment considerably rested with the insurance bill, delaying it can significantly hit the flow of investment to the country.

Therefore, Finance Minister Yashwant Sinha has asked senior officials in his ministry to speed up key legislation and economy recovery measures at least in three areas, official sources disclosed.

First, the ministry would soon finalise an ambitious action plan involving divestment in the blue chips among the public sector undertakings. A core committee of officials from the finance ministry and the Prime Minister's Office will shortlist the names of PSUs for divestment which the government hopes will help it make up for this year's revenue shortfall.

Second, the ministry is compelling the PMO to fully accept and put into action the recommendations of the six task forces under the prime minister's advisory council on trade and industry. The task forces have suggested a series of major policy measures on infrastructure, agriculture, food processing and the capital market.

The task force on infrastructure was headed by Ratan Tata, service industries by A C Mutiah, food and agro-industries management by Nusli Wadia, capital market and financial sector initiatives by Mukesh Ambani, administrative and legal simplifications by Kumar Mangalam Birla and knowledge-based industries by N R Narayanamurthy.

Officials say that the government should, without waiting for the insurance bill to happen, immediately announce these economic reform recommendations of the task forces before the Budget session.

Third, the finance ministry is planning to replace the recent ordinance on buyback shares with a legislation in Parliament. The law ministry is reportedly giving final touches to a corporate-friendly legislation to be introduced in the ongoing winter session of Parliament as industrialists have argued that the ordinance has glaring drawbacks and loopholes.

"We are looking at immediate measures that can rev up the economy because after the joint select committee of Parliament approves the IRA bill, it will take some months for it to be fully operational," a finance ministry official told Rediff On The Net.

He said that even if the IRA bill is passed in the Budget session, it would take months to put together the licensing procedures of opening up the insurance sector to foreign companies.

In the wake of the adverse criticism of the IRA bill from his coalition partners and from within the Bharatiya Janata Party and the Rashtriya Swayamsevak Sangh, Vajpayee would also soon convene his economic and trade and industry advisory councils to explain the government's commitment towards accelerating the economic reform agenda.

Vajpayee's 10-member economic advisory council consists of leading economists like former RBI governor I G Patel, Professor P N Dhar, former finance secretary Montek Singh Ahluwalia, Planning Commission member Arjun Sengupta, Kirit Parekh, Amresh Baghchi, Ashok Desai and G V Ramakrishna. The prime minister's Principal Secretary Brajesh Mishra and Secretary in the PMO N K Singh are members of the council.

The 12-member trade and industry council has leading industrialists like Ratan Tata, Mukesh Ambani, R P Goenka, P K Mittal, Kumara Mangalam Birla, Suresh Krishna, N R Narayanamurthy, Nusli Wadia, A C Mutaiah and Parvinder Singh. Mishra and Singh are members of this council too.

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