Chennai, Feb 28 (IANS) Insurance companies have reacted in a varied manner to Finance Minister Pranab Mukherjee’s proposals for the sector in his budget for 2011-12. Some termed it a boost for the players.
‘The finance minister’s announcement that the insurance bill will be considered in this session (of parliament) is a great boost to the industry,’ Nageswara Rao, CEO and MD, IDBI Federal Life Insurance Company Ltd, said.
Mukherjee, while delivering his budget speech in parliament, said: ‘The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. The UPA (United Progressive Alliance) government is committed to take this process further.’
Mukherjee said the government proposed to move Insurance Laws (Amendment) Bill, Pension Fund Regulatory and Development Authority (PFRDA) Bill, LIC Amendment Bill, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act and State Bank of India (Subsidiary Banks) Bill.
The insurance legislation would increase the FDI limit to 49 percent from the current 26 percent.
The LIC bill would increase the share capital of Life Insurance Corporation (LIC) to Rs.100 crore from its current Rs.5 crore.
The PFRDA Bill would bring in a full-fledged regulator for the pension sector. Now it is regulated by an interim authority.
According to Nageswara Rao, the insurance bill ‘will empower IRDA (Insurance Regulatory and Development Authority) to introduce forward-looking regulations to promote sustainable growth of the industry. The bill gives a lot of flexibility to the IRDA in framing regulations.’
Speaking to IANS, S.B. Mathur, general secretary, Life Insurance Council of India, said: ‘The two bills relating to the insurance sector has been pending for quite sometime. It has been discussed in Parliamentary Committee. For the past several years, the government has been saying that the bills will be introduced.’
Owing to the modification proposed by the finance minister in the service tax on fund management charges, some guaranteed unit linked insurance policies (ULIPs) will attract higher charges, Rao said.
Expressing disappointment at the budgetary proposals, he added: ‘Life insurance industry has been asking for pension annuities to be made tax-free. We are disappointed that the demand has not been met.’
On the positive side, Rao said the increase in income tax exemption limit for senior citizens and the reduction in the age limit for senior citizens to 60 years with basic exemption limit of Rs.250,000.
‘A very senior citizen category has been introduced at the age of 80 years and above with exemption limit of Rs.500,000. This will help seniors to enjoy pension in the retirement years without tax impact. But, to develop the pension market fully, annuities need to be made tax-free. We hope that the new direct tax code will ensure the same,’ he said.
The finance minister also proposed to extend the Rashtriya Swasthya Bima Yojana – a health insurance for the poor – to cover workers of the unorganized sector like hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos.
