The Cabinet on Wednesday cleared amendments to the Insurance Act to pave the way for raising the foreign direct investment (FDI) limit up to 74% from 49%, as proposed in the Budget for FY22. The amendments will have to be ratified by Parliament to take impact.
It also authorized the Pradhan Mantri Swasthya Suraksha Nidhi (PMSSN) as a single non-lapsable reserve fund designed from the share of wellness in the wellness and education cess proceeds. This fund will be utilised for the wellness ministry’s flagship schemes, such as Ayushman Bharat, National Health Mission and Pradhan Mantri Swasthya Suraksha Yojana.
The proposal to hike the FDI limit in insurance coverage is anticipated to open up new avenues of funding at a time when some players are struggling with solvency troubles. The move, along with the choice to launch the IPO of LIC and privatise one of the government-owned common insurers, would bring more efficiency to the market place, analysts say.
Apart from drawing new foreign investors, the hike in FDI limit will also enable foreign partners, at the moment in joint ventures, to raise their stake and handle the Indian insurance coverage firms. Over a dozen insurance coverage corporations in India are formed of joint ventures involving domestic and foreign partners, such as ICICI Prudential, HDFC Standard Life, Bajaj Allianz and Star Union Daiichi Life Insurance.
Many of the current domestic partners of private-sector insurance coverage corporations are unable to infuse fresh capital into their firms larger FDI limit could assistance these firms to bolster their capital base and small business.
Against the minimum regulatory requirement of 1.5 occasions, National Insurance’s solvency ratio languished at just .02 at the finish of FY20, although United India’s hit .3 and Oriental Insurance’s .92. Thanks to initial infusion this fiscal, National’s solvency enhanced to .2 time at the finish of September 2020 – nevertheless way beneath the requirement. United’s solvency rose a tad to .7 as of June 2020. Sensing the insurers’ urgent have to have, the Cabinet in July 2020 authorized larger capital (Rs 9,950 crore) for this fiscal than the budgetary allocation of Rs 6,950 crore.
The move to raise the FDI limit will also assistance strengthen insurance coverage penetration and herald consolidation in the sector, analysts have stated. Domestic insurers would also achieve from the sharing of very best practices of threat management.
While presenting the Budget 2021-22, finance minister Nirmala Sitharaman had proposed to amend the Insurance Act, 1938, to raise the FDI limit in insurance coverage corporations and “allow foreign ownership and control with safeguards”.
Under the new structure (for developing in safeguards), the majority of directors on the board and crucial management persons would have to be resident Indians, with at least half of directors becoming independent ones, and specified percentage of earnings becoming retained as common reserve.
The life insurance coverage sector in India was liberalised in 2000 immediately after the government had permitted foreign corporations to personal up to 26% in domestic insurers. The sector was opened up additional in 2014 when the FDI limit was hiked to 49%.
As for the Pradhan Mantri Swasthya Suraksha Nidhi, it will be a non-lapsable reserve fund for wellness in the Public Account. It can also be tapped to roll out many programmes below the National Health Mission and also for emergency and disaster preparedness.
In the Budget for 2018-19, the government had announced the replacement of a 3% education cess by a 4% wellness and education cess. Analysts had estimated a mop-up of Rs 11,000 crore a year more via this extra 1% cess.
Over 500 non-coal mineral blocks, partially or minimally explored below present leases, but are entangled in legacy troubles and litigation, will be up for grabs. The Cabinet is learnt to have authorized a supplementary proposal on mining reforms from the ministry of mines to enable transfer of letter of intent (LOI) handed out to a productive bidder to the acquirer of the bidder via the insolvency route.
Currently, the Minerals (Other than Atomic and Hydro Carbons Energy Mineral) Concession Rules, 2016, delivers provision for transfer of mining lease or prospecting license-cum-mining lease granted via auction route. However, the rule is silent on transfer of LOI.
The Cabinet also gave its nod to the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession (Amendment) Rules, 2021, so that the lessee will nevertheless have to spend statutory dues equal to the minimum dispatch stipulated in a quarter even if dispatch falls quick. In case, the lessee fails to retain the minimum dispatch criteria for 3 consecutive quarters, “the state government may terminate such lease after giving a reasonable opportunity of being heard”.
The move comes in the backdrop of production and dispatch shortfall of crucial mineral such as iron ore in current occasions which not only led to their price tag hike but also impacted manufacturing of iron and steel in the nation.
In January this year, the Cabinet had authorized a proposal to amend the relevant law for their re-allocations via competitive bidding. Also, the employment-intensive, but extremely below-invested sector, was offered a fillip by performing away with finish-use restrictions for miners. Those with captive leases will be permitted sell the minerals in the open market place. The Cabinet also have the the go-ahead for reallocation of many non-generating blocks of the state-run corporations, a move that could also enthuse the private players as quite a few of these blocks have abundant verified sources.
The moves are in sync with the National Mineral Policy, which aims to raise the domestic production of non-coal, non-fuel minerals by 200% in seven years with higher private-sector participation.