Caught in a logjam
As UPA-II finds itself in the midst of controversies and corruption
charges, BT lists five pending Bills that need urgent attention and
could save the face of the government.
T.R. Ramachandran, MD and CEO, Aviva India
Soon after its victory in the May 2009 general elections, the Congress-led United Progressive Alliance II announced a 100-day agenda to bring about governance, reforms and transparency, and revive the growth momentum. Among other things, there were 13 legislative Bills slated to be cleared in that period. Over 600 days have passed and of the 13, only one - Right to Education Bill, 2009 - has been passed. What happened to the others? Some of these, pending or lapsed, can have far-reaching impact on the economy, corporate sector and investors if passed in their present form.
1. Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2005
Status: Lapsed in 2009 when the 14th Lok Sabha was dissolved
The PFRDA was set up in 2003 to develop and regulate a new pension system for post-retirement security for people in the unorganised and government sectors. The draft Bill provided for statutory powers to the PFRDA in 2005.
Since then, the Bill has been caught in the political cobweb. Although the PFRDA introduced the New Pension Scheme, or NPS, in 2009, the authority remains toothless. "Under the NPS, the PFRDA appointed fund managers to handle a large corpus. But it has no authority to punish them in case anything goes wrong. It has to move civil courts," says M.R. Madhavan, Head of Research at Delhi-based think tank PRS Legislative.
2. Land Acquisition (Amendment) Bill, 2007
Status: Lapsed in 2009 when the 14th Lok Sabha was dissolved
Following widespread protests against the acquisition of farm land for special economic zones, or SEZs, the government decided to introduce amendments to the Land Acquisition Act, 1894. The Bill could bring immense clarity for all the parties involved - the corporate sector, farmers or states. It redefines the very definition of public purpose. Unlike the previous Act, where the government had to acquire 100 per cent land for private projects if it served a public purpose, the amended Bill puts the onus on the corporate entity to acquire 70 per cent land for commercial projects while the state would help to acquire the remaining 30 per cent, for which again they have to pay highly competitive prices.
The Bill mandates that companies share 80 per cent of the capital gains with previous owners if they sell the acquired land later. "But in case such land is sold after 20 or 30 years, tracing the original owners would be difficult," says Madhavan, adding, "The Act will discourage acquisition of land for profiteering and speculative purposes."
3. Insurance Laws (Amendment) Bill, 2008
Status: Pending before the Rajya Sabha since 2008
The draft raises the cap on foreign direct investment, or FDI, to 49 per cent from 26 per cent at present. It also allows players to raise tier-II capital (debt) in addition to the existing tier-I (equity) capital raising method. "The industry is in a nascent stage with the average age of private players around three years. Raising the FDI cap will help it generate the much-needed capital," says T.R. Ramachandran, CEO and MD, Aviva India.
Another important aspect includes more autonomy for the Insurance Regulatory Development Authority, or IRDA. The Bill also proposes that the minimum investment limit for health insurance companies be reduced from Rs 100 crore to Rs 50 crore. "It could become easy for private players to enter the rapidly expanding health insurance market," says Rajesh Sud, CEO & MD, Max New York Life.
4. Companies Bill, 2009
Status: Lapsed in 2009 when the 14th Lok Sabha was dissolved, re-introduced in the Lok Sabha in August 2009
The Bill, which seeks to replace a 55-year-old law, is probably among the longest-pending ones in Parliament. In 1993 and 1997, futile attempts were made to comprehensively revamp the law. In 2003, the Companies Amendment Bill was introduced in the Rajya Sabha and later withdrawn since a number of changes were necessitated in the draft proposal. It was re-introduced in the Lok Sabha in 2008 and lapsed in 2009. The latest draft envisages a modern legislation for the growth and regulation of the corporate sector, which has expanded from around 30,000 entities in 1956 to 8-lakh-plus now. The present draft has fewer provisions (400) as compared to the Companies Bill, 1956 (600), and is easier to comprehend. Some of the changes include speedy incorporation process with detailed disclosures, greater responsibility for independent directors, and revision of the framework for regulation of insolvency, liquidation and winding up. In addition, there are provisions aimed at tightening trading regulations, but some of these are in conflict with the SEBI Act.
5. Forward Contracts (Regulation) Amendment Bill, 2010
Status: Draft pending before the Lok Sabha
The FCRA Bill, pending for more than 12 years, seeks to revamp the 59-year-old Act. The Bill gives more powers to the Forward Markets Commission, or FMC. It also permits trading in commodity options. The Bill proposes demutualisation of existing commodities bourses, setting up of a separate clearing corporation and provisioning for designating the Securities Appellate Tribunal, or SAT, as the appellate tribunal.
1. Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2005
Status: Lapsed in 2009 when the 14th Lok Sabha was dissolved
The PFRDA was set up in 2003 to develop and regulate a new pension system for post-retirement security for people in the unorganised and government sectors. The draft Bill provided for statutory powers to the PFRDA in 2005.
Since then, the Bill has been caught in the political cobweb. Although the PFRDA introduced the New Pension Scheme, or NPS, in 2009, the authority remains toothless. "Under the NPS, the PFRDA appointed fund managers to handle a large corpus. But it has no authority to punish them in case anything goes wrong. It has to move civil courts," says M.R. Madhavan, Head of Research at Delhi-based think tank PRS Legislative.
2. Land Acquisition (Amendment) Bill, 2007
Status: Lapsed in 2009 when the 14th Lok Sabha was dissolved
Following widespread protests against the acquisition of farm land for special economic zones, or SEZs, the government decided to introduce amendments to the Land Acquisition Act, 1894. The Bill could bring immense clarity for all the parties involved - the corporate sector, farmers or states. It redefines the very definition of public purpose. Unlike the previous Act, where the government had to acquire 100 per cent land for private projects if it served a public purpose, the amended Bill puts the onus on the corporate entity to acquire 70 per cent land for commercial projects while the state would help to acquire the remaining 30 per cent, for which again they have to pay highly competitive prices.
The Bill mandates that companies share 80 per cent of the capital gains with previous owners if they sell the acquired land later. "But in case such land is sold after 20 or 30 years, tracing the original owners would be difficult," says Madhavan, adding, "The Act will discourage acquisition of land for profiteering and speculative purposes."
3. Insurance Laws (Amendment) Bill, 2008
Status: Pending before the Rajya Sabha since 2008
The draft raises the cap on foreign direct investment, or FDI, to 49 per cent from 26 per cent at present. It also allows players to raise tier-II capital (debt) in addition to the existing tier-I (equity) capital raising method. "The industry is in a nascent stage with the average age of private players around three years. Raising the FDI cap will help it generate the much-needed capital," says T.R. Ramachandran, CEO and MD, Aviva India.
Another important aspect includes more autonomy for the Insurance Regulatory Development Authority, or IRDA. The Bill also proposes that the minimum investment limit for health insurance companies be reduced from Rs 100 crore to Rs 50 crore. "It could become easy for private players to enter the rapidly expanding health insurance market," says Rajesh Sud, CEO & MD, Max New York Life.
4. Companies Bill, 2009
Status: Lapsed in 2009 when the 14th Lok Sabha was dissolved, re-introduced in the Lok Sabha in August 2009
The Bill, which seeks to replace a 55-year-old law, is probably among the longest-pending ones in Parliament. In 1993 and 1997, futile attempts were made to comprehensively revamp the law. In 2003, the Companies Amendment Bill was introduced in the Rajya Sabha and later withdrawn since a number of changes were necessitated in the draft proposal. It was re-introduced in the Lok Sabha in 2008 and lapsed in 2009. The latest draft envisages a modern legislation for the growth and regulation of the corporate sector, which has expanded from around 30,000 entities in 1956 to 8-lakh-plus now. The present draft has fewer provisions (400) as compared to the Companies Bill, 1956 (600), and is easier to comprehend. Some of the changes include speedy incorporation process with detailed disclosures, greater responsibility for independent directors, and revision of the framework for regulation of insolvency, liquidation and winding up. In addition, there are provisions aimed at tightening trading regulations, but some of these are in conflict with the SEBI Act.
5. Forward Contracts (Regulation) Amendment Bill, 2010
Status: Draft pending before the Lok Sabha
The FCRA Bill, pending for more than 12 years, seeks to revamp the 59-year-old Act. The Bill gives more powers to the Forward Markets Commission, or FMC. It also permits trading in commodity options. The Bill proposes demutualisation of existing commodities bourses, setting up of a separate clearing corporation and provisioning for designating the Securities Appellate Tribunal, or SAT, as the appellate tribunal.
