Govt pops up more FDI in insurance

NEW DELHI: It''s time for some policy window-dressing. After delivering a virtual knockout blow to the disinvestment process yesterday, the government is now frantically looking for options to offset its negative impact on international investors and the markets. And, sources say, it has zeroed in on two proposals — raising the cap on foreign investment in insurance and allowing foreign airlines in domestic routes. These measures have hardly been thought through, but were mooted at Saturday''s CCD meeting in order to cushion the blow of the larger decision on disinvestment on investor sentiment. It was also suggested that these measures should be taken soon in order to give Prime Minister Atal Bihari Vajpayee some positive talking points during his US visit. It''s learnt that the CCD has directed commerce minister Murasoli Maran to bring both the proposals. In fact, finance minister Jaswant Singh insisted that the two measures should be given in-principle clearance at the CCD meeting itself — "It will be well-timed as the prime minister is undertaking his US trip," he said — but the other Cabinet members felt that the CCD was not the right forum to take such a decision. It''s obvious that government leaders recognise that there will be a major fallout of the decision to put disinvestment on the back burner and it could, indeed, badly erode the government''s credibility on reforms. This anxiety was obvious when Mr Jaswant Singh persisted with his suggestion — on higher FDI in insurance and allowing foreign airlines to fly domestic routes — and said that the PM has the power to use even this forum, the CCD, for taking the decision. However, Mr Maran was not impressed. He reiterated that such a decision in the CCD would not be proper. But he promised at the same time that his ministry would prepare the two proposals as soon as possible. The exact nature of increase in FDI in insurance is not known, although the N K Singh committee on FDI has suggested that the cap be raised to 49%. Incidentally, Mr George Fernandes, who had raked up the security angle to oppose privatisation in the oil sector, was party to the move to allow higher foreign participation in insurance and facilitating the entry of foreign players into the domestic aviation sector. While these two measures are expected to shore up market sentiment, the finance ministry is also expected to ask domestic financial institutions to intervene and prevent any significant depletion in the market cap of PSU companies.