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Swadeshi lobby stalls plan for foreign equity in insurance

George Iype in New Delhi

The Atal Bihari Vajpayee government's decision to permit foreign equity participation in the insurance sector has been stalled due to stiff opposition from the Swadeshi lobby and lack of consensus among the coalition partners.

Two weeks back, Finance Minister Yashwant Sinha had announced that the government would allow 26 per cent foreign equity in insurance companies.

The foreign equity proposal came up after a group of ministers on insurance reforms recommended that the government should give minority equity stake to foreign companies in the sector.

The proposal is now pending before the Cabinet for approval.

But the Swadeshi lobby comprising leaders of the Rashtriya Swayamsevak Sangh and the Swadeshi Jagran Manch has asked Vajpayee to shelve the proposal for the time being.

Sources in the Bharatiya Janata Party said most of the party's economic wing members and the RSS-SJM leaders have jointly written to Vajpayee stating that the government should keep the insurance sector free from foreign participation.

"We have asked the prime minister to desist from opening up the insurance sector to foreign equity and give the domestic insurance companies one more chance to improve their performance," a BJP economic cell member told Rediff On The NeT.

According to the Swadeshi group, giving even minority equity in insurance to foreign companies will be disastrous, as domestic insurance companies would go haywire once the sector is thrown open.

The Swadeshi leaders have also questioned the need to open up the insurance sector, which they argue is the most reliable and key financial sector in India.

They also argue that Sinha in his Budget speech had ruled out foreign participation in insurance.

While the Vajpayee government is in a quandary on the crucial decision on insurance, the Swadeshi leaders have approached Human Resources Development Minister Dr Murli Manohar Joshi and Defence Minister George Fernandes to scuttle the proposal before the Cabinet.

Both Dr Joshi and Fernandes had protested against foreign equity in insurance when Sinha initially proposed the idea before the Cabinet some five months back.

There is also a feeling among the senior BJP leaders that the Vajpayee government did not consult the party ideologues and the RSS-SJM leaders before deciding on the proposal.

BJP economic advisors and the party documents including the poll manifesto have consistently opposed any reforms in the insurance sector in the last few years.

While the liberals in the BJP coalition have adamantly supported the government decision, the conservatives' stiff opposition might force Vajpayee to discuss the issue among his party colleagues before finalising the insurance cap.

"The final word on the question of opening up the insurance sector has not yet been uttered," BJP vice-president K L Sharma told Rediff On The NeT.

He said there is an opinion in the party that the BJP leadership should discuss the issues involved before the government takes a crucial decision on the insurance matter.

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