New UPA thrust on insurance, infrastructure in reform wave

Gaurav Choudhury

New Delhi, Sept. 30 -- Unfazed by continuing opposition to recent reform initiatives such as allowing foreign direct investment (FDI) in retail and a diesel price hike to contain the fiscal deficit, the UPA government is preparing another round of big-ticket reforms. On the cards are a big push for infrastructure through a special fund and a fresh thrust to help foreign investors in insurance.

Prime Minister Manmohan Singh's government is willing to walk the talk to cover lost ground through a rush of measures, which include a politically contentious move to raise the FDI stake ceiling in insurance companies to 49% from the current 26%.

India also is set to float a mega infrastructure debt fund (IDF) that will allow the government to dig deep into the pockets of households and institutional funds to raise resources to build highways and also test investor confidence in a slowing economy that has been the target of unsparing criticism from global credit rating firms.

The Cabinet is likely to approve this week both these proposals as also another move to set up a Prime Minister-led national investment board (NIB) to fast-track all infrastructure projects that involve more than Rs. 1,000 crore, government sources told HT.

The Insurance (Amendment) Bill that proposes to raise the FDI limit to 49% has been pending in Parliament after it was introduced in the Rajya Sabha (Upper House) in 2008 for lack of political consensus.

The sources said that government is keen on introducing an amended Bill in the winter session of Parliament to raise the FDI limit, demonstrating its intent about pushing ahead with measures, even if these are fraught with political risks.

The probability of Parliament voting the Bill into law, however, remains uncertain given the strong opposition from both former ally Trinamool Congreess and the Left parties.

HT could not ascertain the size of the proposed infrastructure fund but a source told HT that it would be much greater than the $2 billion (R10,000 crore at that time) IDF that the government had launched in March this year.

Besides, the new fund will be structured to enable "take-out financing" under which a government-run organisation will take over the outstanding loans from lenders to long-term infrastructure projects.

The Cabinet is also likely to approve the NIB-a brainchild of finance minister P Chidambaram- to fast-track infrastructure projects such as expressways, ports and railways.

Under the plan, once the final decision is taken by the NIB on a project, no other ministry or department or authority would be able to interfere with the decision or delay its implementation.

Published by HT Syndication with permission from Hindustan Times.