Budget Speech - PART A
- The CMP accords high priority to infrastructure. The India Infrastructure Report has been published and it now remains for us to implement the report. The critical need is funds, and that too long-term funds. That is why the CMP said, "There is a strong link between infrastructure development and financial sector reforms. Infrastructure needs long-term finances." Hon'ble Members are fully aware that long-term funds are in the Pension and the Insurance sectors.
- Our foremost companies in the insurance sector are LIC and GIC. After a long interval of time, LIC and GIC have been given the full complement of Board members. We have also decided to grant substantial autonomy to LIC and GIC, including the power to make non-scheduled, non-consortium investments, to determine the terms and conditions of service of their employees and agents, to make regulations and some other powers. LIC and GIC will be further strengthened in due course.
- Under the present laws, pension funds are, by an archaic definition, included in the business of life insurance. However, it is self-evident that pension and insurance are two different benefits and two different businesses. While life insurance is the monopoly of LIC, several pension funds have been rightly exempted and allowed to operate independently. In 1995, at the instance of my distinguished predecessor, UTI floated the UTI Retirement Benefit Plan. It has attracted about 80,000 subscribers. I propose to allow UTI to expand the above plan into a full-fledged pension fund. UTI has made a request to government in this regard; LIC has no objection; and hence it is appropriate to amend the laws.
- LIC has also requested government to permit it to promote joint ventures in the pension business. There is no reason to deny LIC this right. The proposed amendment will permit LIC to enter into such joint ventures. After the amendments, UTI's pension fund will compete with LIC's pension schemes.
- Similarly, the penetration of health insurance cover in our country is distressingly low. Just about 20 lakh Indians have some kind of health cover. The Jan Arogya scheme, launched barely six months ago, has already attracted 4 lakh policy holders. Clearly, there is a demand for health insurance products. GIC has frankly admitted that its Mediclaim policy has not been successful and that it would like to promote joint ventures in this line of business. GIC is also confident of facing competition in the health insurance business. Accordingly, I propose to move necessary amendments to enable GIC to float joint ventures and also to allow entry of selected Indian players in the health insurance sector.
- What I have outlined is a very modest opening of one segment of the insurance sector. LIC will continue to enjoy a monopoly in the life insurance business and GIC will continue to enjoy a monopoly in the non-life, non-health insurance business. I would also like to make it clear that only a few Indian companies, that is Indian-controlled and with majority Indian ownership, will be permitted to enter the health insurance business. Comprehensive regulations will be made and enforced by the Insurance Regulatory Authority (IRA) for all the service providers in the insurance industry. They would also have to meet the prudential, investment and social norms laid down by the IRA.
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