The Nation: IRA Bill; Policy Lapse

Conservative resistance from within prevents the BJP and the Congress from passing two pro-reform laws.

The term "leftist" owes its origin to the radicals sitting to the left of the President in some legislatures. In India's circular houses of Parliament the recent avatar of leftism, which is a blend of protectionism and statism, has spread across 360 degrees. Though all parties swear by reforms, none of them is ready to change the laws if the "foreign bogey" shows up round the corner as a result. The "socialist" pandemic was evident last week when two pro-reform bills -- the Insurance Regulatory Authority (IRA) and the Patents (Amendment) Bill -- slid into cold storage in quick succession. Neither of the two big parties -- the Congress and the BJP -- could convince its members of the need and the desirability to end the monopoly of LIC and GIC in the insurance sector and to bring the existing patents law one step closer to the requirement of the WTO agreement (see box) to which India is a signatory.

Prime Minister Atal Bihari Vajpayee mustered courage to press ahead with the IRA Bill after Congress President Sonia Gandhi had called him up the previous week to say that her party would broadly support the move to open up the insurance business. It was an important call. Apart from ushering in the first comprehensive law to allow both domestic and foreign private investment in a sector long regarded as the state's exclusive domain, it was going to be the first fruit of collaboration between the BJP and the Congress -- the two adversaries who together occupy 322 seats in the 542-member Lok Sabha. Finance Minister Yashwant Sinha also shed his past reservations about the bill and was ready to pilot it.

Pro-reform Manmohan Singh has been side-lined in the Congress

However, on the morning of December 15, the day of the bill's introduction, Sonia sensed something was wrong when she sat with a dozen important members at the CPP office to blow the "all clear". The Congress president at once called a larger meeting of 40-odd members, including the 13 members of the Legislative Action Committee, at the conference hall of Parliament House. The two-hour meeting uncorked the resentment against the bill, pushing into minority its two champions, Manmohan Singh and Pranab Mukherjee, both former finance ministers in Congress governments. While Manmohan Singh's argument was that the Congress had promised to reform insurance in its poll manifesto, Rajya Sabha member Vyalar Ravi promptly circulated a five-page memo against the bill. Ravi said at the meeting that since the Congress had lost the 1998 elections the manifesto could no longer be binding on it. "Soniaji was not the party president when the promise was made," he argued.

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It was a double whammy for the Congress. After retracing its steps on the IRA Bill, the party had to revise its stand last week on supporting the BJP-led Government in amending the Patents Act, 1970, in line with the Trade Related Intellectual Property Rights (TRIPs) of the 1996 WTO agreement. The embarrassing fact is that the Congress was in power when India ratified the agreement.

On December 16, the day Industry Minister Sikander Bakht introduced the bill in the Rajya Sabha (it was passed by the Lok Sabha in 1995), the bigwigs of the Congress Parliamentary Party (CPP) met in the morning as usual to discuss the day's strategy. However, in that meeting, three members, chief whip P.J. Kurien, party spokesman Ajit Jogi and Legislative Affairs Committee member Prithviraj Chavan, lambasted the bill. Their argument: the exclusive marketing rights (EMR) given to foreign patents for pharmaceutical and agro-chemical products, during the 10-year transition period of Indian patents from process-only to both product and process, is altogether unacceptable in the national interest. Manmohan Singh, finance minister in the Congress regime, then met Parliamentary Affairs Minister Madan Lal Khurana and reiterated that his party would support the bill regardless because failure to put the EMR in place by April next year might entail action against India under the WTO agreement.
Congress President Sonia Gandhi was absent from Parliament House that day. When she returned the next day, Manmohan had to pay the price for his overzealousness, with Sonia condemning the move to "bail out" the BJP. With the Congress resigned to blocking the bill at the Rajya Sabha, where the BJP-led alliance is in minority, the amendment is sure to hang fire for a long time.

The meeting also showed the extent of mobilisation against the IRA Bill within the Congress party, with most state-level stalwarts speaking against it. The critics included two heavyweights, Vijayabhaskara Reddy and P. Shiv Shankar from Andhra Pradesh, a state where the party expects to do well in the next elections, and Balram Jakhar and Rajesh Pilot, leaders belonging to the two prominent north Indian castes of Jat and Gujjar. In finding fault with the bill, Ravi found more than his match in K. Karunakaran, the veteran from his native state of Kerala. The nay-sayers included Kamal Nath and Ajit Jogi from Madhya Pradesh, the state where the victory of the Congress in the last elections has put the party on a comeback trail at least in popular perception. Manmohan Singh and Mukherjee looked like the last batsmen out in a losing match. With no record of electoral conquest in their otherwise distinguished careers, Sonia was naturally not much interested in their defence of the bill, however principled. Her final decision: let it go to the Standing Committee of the Ministry of Finance, chaired by Congress MP Murli Deora.

It was, however, at a later meeting of all-party leaders in the chamber of Lok Sabha Speaker G.M.C. Balayogi that the decision was somewhat altered, with the Speaker agreeing, on the suggestion of the small parties who have no representation on the Standing Committee, to refer the bill to a Joint Select Committee instead. However, putting the bill into the grind of the parliamentary committees, where more than 70 bills are currently stuck, is as good as kissing it good-bye. Even if the committee gives its report in the budget session, there will be too many businesses before the House in that period to find time for a discussion. After the party meeting of the Congress, when leader of the Opposition Sharad Pawar met Parliamentary Affairs Minister Madan Lal Khurana to tell him about the party decision, Khurana was jubilant. He told Pawar: "I must thank you. The RSS has been telling us not to pass the IRA Bill. You have saved us."

The insurance-sector reforms are seen by the western investor community as the litmus test for India's willingness to liberalise its economy. The move, however, had a chequered path. The Congress government of P.V. Narasimha Rao, which had set up the Malhotra Committee for reforming insurance, could go only as far as setting up an Interim Insurance Regulatory Authority (IIRA). The succeeding United Front (UF) government did manage to introduce an IRA Bill in Parliament but after it had gone through the Standing Committee in May 1997 the bill faced so much resistance from most UF partners, notably the Marxists, that the then prime minister I.K. Gujral had to withdraw it.

In the BJP-led Government's budget speech, the finance minister had said he would open up the insurance sector for competition from "private Indian companies" and would give a statutory character to IIRA. However, the bill that Sinha was ready to introduce on December 15 allowed foreign investment up to 40 per cent. This was despite protests from the RSS and from influential BJP leaders like Minister of State for Human Resources Development Uma Bharati, party General Secretary Sumitra Mahajan and former Himachal Pradesh chief minister Shanta Kumar. Surprisingly, both the saffron and tricolour brigades were nettled by the same thorn: allowing foreign equity in insurance companies. Shiv Shankar almost echoed the RSS swearword that it is a "sell-out to foreigners". Now that the bill is put on ice, the BJP as well as the Congress can raise a toast to their undying protectionist conscience.