Government mulls ordinance to up Insurance FDI cap

NEW DELHI: The option of issuing an ordinance to increase FDI from 26 per cent to 49 per cent in the insurance sector is back on the table as it appear increasingly unlikely that the Rajya Sabha will pass the insurance bill by Tuesday, the last day of the winter session. Senior ministers had even late last week played down the likelihood of an ordinance to push key economic legislation in the hope they would be able to push them through at the fag end of the session, but with the winter session all but certain to be a washout, some are now talking of revisiting the ordinance route.

Congress — which is in principle agreeable to increasing the FDI cap to 49 per cent and had even brought a bill to this effect when it was in power — and the Left parties have said the Narendra Modi dispensation is keen on passing the insurance bill before US President Barack Obama visits India for the Republic Day celebrations in January.
Senior NDA ministers insist there are precedents — set by successive Congress governments — where an ordinance has been passed after a bill could not get the nod of both the Houses of Parliament.

"There are more than several instances where ordinances have been issued after a bill was not passed by Parliament. In its more than 40 years of rule, Congress has set precedents for several things," a Cabinet minister said. However, the ordinance route is fraught with challenges. The buck on issuing this ordinance stops at the desk of President Pranab Mukherjee.

While he has been accommodative in the past — the ordinance on allowing a former Trai Chairman to occupy a government post after retirement got his nod without any hitch — he is also known as a stickler for constitutional propriety.

Article 123 of the Constitution that deals with ordinance making powers of the President clearly states that he can issue an ordinance if he is "satisfied that circumstances exist which render it necessary for him to take immediate action". It remains to be seen how the NDA convinces Mukherjee that there is a need for "immediate action" in increasing the FDI cap in insurance sector to 49 per cent when the bill has been pending for so many months.

Some law-makers also point out that the foreign investors are not likely to be convinced about investing in the insurance sector relying on an ordinance which has been issued after it failed to get the bill passed in Parliament. At best, it would only send a positive message to President Obama.