Budget 1997-98: Full Text
- 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
- 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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