With the main Opposition BJP on its side, the government on Wednesday got the long-pending Pension Bill passed in the Lok Sabha, which seeks to bring 26 per cent FDI in pension funds and also has a provision to increase the cap in line with insurance sector.
The Pension Fund Regulatory and Development Authority Bill, 2011 which was passed with 174 members supporting and 33 opposing, also allows the subscribers of National Pension Scheme to invest in stock markets, raising concerns over putting hard-earned savings in the equity market.
The government has been trying hard to increase the FDI limit in insurance sector to 49 per cent from the current 26 per cent but it needs support of Opposition parties and none of them have agreed.
Finance Minister P Chidambaram, who was hopeful of bringing the bill in this session, said Parliament might take up insurance bill in the next session.
The bill provides statutory backing to the PFRDA, 10 years after the regulator was set up through an executive order. The legislation seeks to empower the PFRDA to regulate the New Pension Scheme, which was launched in 2004.
The government managed to get the bill passed with just two days remaining for the monsoon session to conclude and amid opposition from the Left parties, Trinamool and DMK condemned the government for “bulldozing” the House to enact the law that is opposed by a large section of people and for allowing social security monies to be invested in volatile stocks.
“This a sordid story. One of the last chapters added to a story of great betrayal of Indian nation,” said CPI leader Gurudas Dasgupta during the debate on the bill.
The government, however, defended the bill saying it would provide subscribers a wide choice to invest their funds for assured returns, like opting for government bonds as well as in other funds depending on their capacity to take risk.
“The subscriber can choose where does he want to invest his money, it is based on the principle of you save while you earn,” the finance minister said, replying to the debate.
The new pension scheme currently has 52.83 lakh subscribers, including employees of state governments and private sector, and has assets under management of close to Rs 35,000 crore, Chidambaram said, justifying the statutory status to PFRDA.
The bill will now be moved in Rajya Sabha and Chidambaram said he was confident it will be passed there too.
The pension bill could help channelise funds into building long-term assets for the country, including the infrastructure sector. The government wants to ease rules for insurance and pension sectors to allow them to invest in infrastructure, where it is seeking $1 trillion investment till 2017.
India Inc hailed the bill, with CII saying, “The reform will go a long way in increasing the coverage as only around 12 per cent of the active workforce has any formal pension or social security plan”.