(Weekly Organ of the Communist Party of India (Marxist)
November 09, 2008
AIIEA TO INTENSIFY AGITATION AGAINST FDI HIKE
Defeat UPA Govt's Attempt To Hike FDI Limits In Insurance Sector
K Venu Gopal
THE union cabinet in its meeting on October 30, 2008, has decided to go ahead with the comprehensive insurance bill, including the increase in FDI up to 49 per cent and increase in equity of LIC to Rs100 crore. It is reported that the Bill to amend the provisions of IRDA Act to increase the FDI limit would be placed in the Rajya Sabha (perhaps to ensure that the Bill does not get lapsed) and the Bill to amend LIC Act to increase the capital of LIC would be placed in the Lok Sabha in the coming session of the parliament, which is scheduled to be reconvened from December 10, 2008.
Upon hearing this news, insurance employees across the country led by the All India Insurance Employees’ Association (AIIEA) immediately staged demonstrations on October 31, 2008, protesting against the government’s moves and reiterated their resolve to go in for a one day strike action when the government brings in the bill in the parliament.
It was during the budget speech in 2004 that the finance minister P Chidambaram made his intentions about increasing the FDI limits in insurance clear. However he had to shelve it due to the strong opposition mounted by the Left parties. Alongside, the All India Insurance Employees’ Association went on a campaign among the people highlighting the dangers of such an increase in FDI. It was in the month of April 2007 that the government once again broached the subject of a comprehensive insurance bill with the Left parties. The Left parties took an unflinching stand on the issues discussed and the Bill could not go ahead.
After winning the “trust” vote on July 22, 2008, the government once again made its intentions clear that it would go ahead with the reforms in the financial sector, including insurance, banking and pensions. It is clear the government is doing this as part of its commitment made to the India-US CEO forum which conducted its meetings alongside the negotiations on the India-US nuclear deal.
WHY THIS BILL MUST BE DEFEATED
The AIIEA’s opposition to the proposed increase in FDI in insurance sector is based on the fact that insurance industry mobilises people’s savings needed for the long term investment in infrastructure and other areas. For example LIC alone is poised to mobilise around Rs 2 lakh crore through premiums in the current financial year. And in five years LIC can mobilise Rs 10 lakh crore which can comfortably meet the infrastructure development needs of the country. Further, while the world insurance premium growth has been stagnating at 4 per cent, LIC has grown at an annualised growth rate of 40 per cent during the last five years. India is a young nation with 50 per cent of its population being in the working age group. The present financial crisis has made the insurance industry stagnate further in the advanced countries. Hence, their demand for a higher share of our savings.
But, if the FDI is increased in this sensitive sector the savings of the people will go into the control of international finance capital.
The AIIEA believes that domestic savings play a very important role in the economic development of the country. The Commission on Growth and Development (popularly known as the Growth Commission) headed by Dr Michael Spence, Nobel Laureate, observed “Our view is that foreign saving is an imperfect substitute for domestic saving, including public saving, to finance the investment a booming economy requires.” When this is the reality where is the need for increasing FDI limits in a sector which mobilises domestic saving?
Further, the chairman of IRDA, J Harinarayana commenting on the crisis of AIG said that Tatas have the resources to take over the share of the AIG (in the Tata-AIG insurance companies) if such a situation arises. The question to be asked is that when the Indian partners are in a position to infuse more capital, where is the need for the hike in FDI?
GLOBAL CRISIS AND OUR POLICIES
The global financial crisis was triggered by the policies of deregulation and overall withdrawal of State. In the final analysis the ongoing attempts to deal with the crisis have seen the governments across the US and Europe intervene aggressively by announcing bailout packages to help the ailing financial institutions. In the US, Freddie Mac and Fannie Mae were taken over by the government. The US government saved American International Group (AIG), the giant insurance company from bankruptcy and almost nationalised it by taking over around 89 per cent of the shares. The US senate agreed to a $700 billion package of the government to help the ailing banks and insurance companies in the country. Media reports quoting the Wall Street Journal said that MetLife Inc., Prudential Financial Inc., and New York Life Insurance Co., were interested in exploring a sale of equity stakes to the US government. ING, another insurance company, accepted a capital injection plan by the Dutch government to supply €10 billion into its operations, in exchange for securities. Under the British support plan for banks at least £ 200 billion was to be made available to banks under the Special Liquidity Scheme.
Many economists accept that the impact of the crisis on Indian financial sector was limited because our economy was not exposed to the same level of liberalisation. It is again very clear that it was the stand of the Left parties that insulated our financial system from this meltdown. However the Manmohan Singh government is trying to further liberalise the financial sector and inviting alongside the accompanying risks as part of keeping its promises made to the US during the negotiations on nuclear deal. This is definitely not in the interest of the nation.
It is unfortunate that the UPA government is refusing to learn lessons from the global financial meltdown and is exposing the Indian insurance industry to the speculative financial capital. It is certain that the UPA government wants to help the multinational insurance companies -- downgraded by the rating agencies in their own countries – gain greater market access in India.
AGITATION WILL BE INTENSIFIED
It is in this background that the secretariat of the AIIEA immediately went into a session at Hyderabad on November 2-3, 2008 and decided to intensify the agitation against the decision of the government to further liberalise the insurance sector.
The decision of the cabinet to introduce a comprehensive legislation on insurance amending the IRDA Act, General Insurance Business Nationalisation Act (GIBNA) and Insurance Act 1938 in the Rajya Sabha in the next session of the parliament is a completely retrograde step. Through this legislation the government aims to hike the FDI limit from 26 per cent to 49 per cent, change the investment norms of insurance funds facilitating transfer of funds outside the country and privatise the four public sector general insurance companies. These measures would harm the Indian economy.
The government also intends to amend the LIC Act through a separate legislation to increase the capital of LIC from Rs 5 crore to Rs 100 crore. The LIC today has an asset base of Rs 8,04,000 crore which is nearly Rs 1,17,000 crore more than its liability. It has an impeccable record of claim settlement and through this it has won the trust of the people. This is reflected in LIC being voted the best service brand for the past five years consecutively by the Economic Times-ORG Marg survey. The LIC does not need any additional capital. In this situation it becomes clear that the decision to hike the capital is the first step towards privatisation of the most successful public sector institution. The ultimate aim of international finance capital is not mere increase in the FDI limits, but taking control of the giant LIC itself. The move to increase the capital of LIC from the present Rs 5 crore to Rs 100 crore is aimed at facilitating disinvestment at a later date. This will harm national economy. Hence, the AIIEA will bitterly oppose this move also.
The secretariat of the AIIEA has, therefore, decided on the following agitational programme:
One-day strike in LIC and four general insurance companies on the day following the introduction of the Bill to hike the FDI limits;
One-hour walkout strike in LIC on the next day of introduction of the Bill to amend the LIC Act to hike the capital base;
Conventions at more than 100 centres across the country to mobilise opinion against liberalisation of insurance sector;
All India convention at New Delhi in the first fortnight of December against liberalisation of financial sector (in consultation with the other unions/associations in the financial sector); and
Memorandums to be submitted to members of parliament, explaining our opposition to further liberalise insurance sector.
The AIIEA seeks the cooperation of the public in this campaign which is aimed at protecting the domestic savings from being taken over by the international finance capital.
(The writer is general secretary of the AIIEA)