Thursday, October 04, 2012

Chidambaram reaches out to the BJP, putting behind the acrimony of recent times

 Finance Minister P.Chidambaram announcing the cabinet's approval of amendments to the insurance and pension amendment acts proposed by the parliamentary standing committee of the ministry of finance headed by former finance minister Yashwant Sinha said that he had passed on the papers to the leaders of opposition -- Sushma Swaraj in Lok Sabha and Arun Jaitley in Rajya Sabha -- and said that he was optimistic that the main opposition party as well as the other parties would help pass the legislation. "The main opposition party has helped in the past in passing the bill," he said, indirectly making the point that the two major parties worked with each other earlier too. He referred to Sinha without naming him as a "distiguished member"of the main opposition party and said that the bulk of the amendments suggested by the standing committee were accepted except the one which wanted a cap on FDI in insurance at 26 per cent. The cabinet has decided to raise FDI in insurance to 49 per cent, and Chidambaram said that the government would discuss and negotiate and convince and see to it that the bills with the amendments will be passed in parliament.
Chidamabaram clarified that the FDI in insurance was only intended for private sector insurance companies, and that public sector insurance companies would not be affected by this in any way. He referred to the view of the Insurance Regulator and Development Authority (IRDA) chairman saying that insurance companies would need huge inflows of funds and that 26 per cent would be inadequate. The finance minister said that the IRDA chief's opinion was not the sole criterion for deciding to increase the FDI limit from 26 per cent to 49 per cent. He said that depending on the outcome of the proposed amendment with regard to FDI in insurance, the same rule will then be extended to FDI in pension fund as well.
He also announced amendment to the Competition Act to extend the jurisdiction of the Competition Commission to all sectors even when there are sector-specific regulatory authorities in place. This was to oversee that there was fair competition in the market. He said exceptions were also spelled out and gave the example that if a failing bank were to be merged with a bigger bank in order to save jobs then that will not attract the rules of the Competition Act.
The cabinet has also decided set up companies and associations to raise infrastructure debt funds which will have longer debt period of 15 to 20 years because infrastructure projects need that kind of a gestation period. He said that banks loans usually have a loan term of five to seven years. With the setting up of infrastructure debt funds, which are to be treated as non-banking financial companies, the banks can opt out after seven years and the infrastructure debt fund will take over the financial liability. He explained that this will free up the bank's fund which then can be used to fund a new project.
The Draft Twelfth Five Year Plan was approved by the cabinet and the document will now go before the National Development Council. Chidambaram referred to the plan document as ambitious and said that it envisaged a 8.2 per cent growth during the plan period, 2012-2017. He said that the emphasis of the Plan was on education, health, drinking water supply and infrastructure.

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