Finance minister Arun Jaitley, who held a pre-budget meeting with the insurance majors — both life and non-life — on Thursday, is likely take up the issue of increasing the foreign direct investment (FDI) limit from 26% to 49%.
However, it will be done in a staggered manner and the limit could be first raised for the non-life segment. Sources said that the industry has been advised to look into the issue and come up with a concrete proposal to the finance ministry.
It is learnt that the FDI limit could be increased without providing voting rights to the foreign partners for the first couple of years. “However, a decision on this is yet to be taken,” the sources said.
“We dont know...We are talking... it is pre-budget discussion,” ministerof state for finance Nirmala Sitharaman told reporters when asked whether the industry was opposed to capping voting rights at 26% in case the limit is raised to 49%in the sector.
It is also learnt that the finance ministry may not increase the limit of tax benefit to those investing in insurance products under Section 80c of the Income Tax Act due to the tight fiscal situation of the country.
“While the finance minister is ready to look at the issue of increasing the FDI limit he has indicated that the industry needs to get back with a proposal on it and it could be taken forward only in a staggered manner,” an official told HT on conditions of anonymity.
The Insurance (Amendment) Bill that envisages raising the FDI limit to 49% has been pending in the Parliament since 2008 and it could not go through for lack of political consensus.