Allies, Oppn murmurs defer 26% FDI clause in PFRDA Bill

In a bid to avoid yet another face-off with the Trinamool Congress (TMC), the Union Cabinet on Thursday deferred a decision on the PFRDA Bill that sought to allow 26% FDI in the pension sector.

While the 26% cap was decided to appease the TMC, CNBC-TV18 has learnt that the Bill has a provision to increase the proposed cap if the FDI limit in the insurance sector is also hiked. Also watch the accompanying video
In the end, it amounted to a smart attempt to keep allies and the Opposition happy. The clause for permitting foreign investment in pension funds was worded in such a way that that it would start with 26% and move to higher levels in tandem with the quantum of FDI in the insurance sector. Officials aware of the details told CNBC TV 18, that the clause was worded on the following lines.
The Foreign Investment Policy for Pension Funds would be part of the PFRDA Bill 2011. The amendment also adds that the foreign investment limit would stand at 26% of the paid-up capital of the funds or the percentage of FDI, as would be applicable for Indian insurance companies, whichever is higher.
When the Insurance Amendment Bill was deferred by the by the Cabinet on May 10, finance minister Pranab Mukherjee announced that retaining FDI in insurance at 26% did not make any sense.
The TMC on Thursday admitted that it had reservations on the PFRDA Bill, as it was not part of the departmental standing committee that reviewed the bill.
Railways minister Mukul Roy wrote to Pime Minister Manmohan Singh, conveying TMC's objections on the PFRDA Bill, and to avoid another faceoff with its ally, the UPA II leadership decided to shelve the Bill.
So, as Mamta Banerjee plays truant again and with the Presidential elections around the corner, no fresh date has been decided to clear either the Insurance or PFRDA Bill, underlining the fact that this unique opportunity to link FDI caps in two separate sectors, will not see the light of the day soon.