Thursday, June 7, 2012

Pension bill deferred over difference of views

Dear Comrades,

Stumbling once again on its ambitious agenda of key economic reforms, the UPA government on Thursday deferred the clearance of amendments to the Pension Fund Regulatory and Development Authority (PRFDA) Bill, 2011 in an Union cabinet meeting. Once again the pressure of its maverick ally—Trinamool Congress chief Mamata Banerjee—worked on the government that is already facing charges of policy paralysis from different quarters.

Three proposed amendments:

  1. The first amendment will reportedly allow contributor to withdraw funds from the pension scheme in case of an emergency.

    Also, the subscriber will be reportedly given a minimal assured return for the investment in his fund.
  3. The third amendment reportedly says there will be a 26 per cent cap on the Foreign Direct Investment (FDI) in the scheme. Earlier, the cap was not specified. The BJP has been demanding the FDI cap of 26 per cent to be included in the PFRDA Bill.

The pension bill or the PFRDA Bill suggests changes to how savings of nearly 25 lakh Indians are invested. Currently, these savings are invested in government securities that offer a fixed rate of return. The new bill allows pension funds flexibility on appointing a professional fund management company and lays down roles and responsibilities. 

Top sources in the government told HT that railway minister Mukul Roy shot a letter to Prime Minister Manmohan Singh and finance minister Pranab Mukherjee on Wednesday evening flagging the “concerns” of his party chief and West Bengal chief minister Banerjee over the pension bill.

In December 2011, a similar letter from Mamata Banerjee, then railway minister, forced the government to drop the item from its cabinet agenda.

The amendments to the long-pending key reforms bill aims to retain the cap on foreign direct investment (FDI) at 26%. It allows the pensioner to demand minimum assured returns and withdraw from his account.
According to sources, in the cabinet meet, cabinet secretary Ajit Seth merely said “item number three is deferred” even as some ministers looked at each other and the finance minister remained silent.

Railway minister Roy's letter mentioned that Banerjee feels the bill should not be pushed without “a broad-based political consensus”.

Roy’s letter mentioned that the manifesto of the Trinamool Congress for the 2011 assembly election opposes such reforms that may jeopardize the interest of common people.
It also pointed out that last year, when the bill was discussed in the parliamentary standing committee on finance, there was no Trinamool representative in the panel. (Sudip Bandopadhyay was initially a member of the standing committee but he left it after becoming the junior minister for health).
The finance ministry moved to put amendments to the pension bill after partymen raised a stink over the United Progressive Alliance’s (UPA) alleged policy paralysis at the Congress working committee meeting on Monday.
The UPA — especially after the downgrading of India’s credit ratings and the nine-year low gross domestic product growth rate — revived the cabinet note prepared in February.
The Pension Fund Regulatory and Development Authority (PRFDA) Bill, 2011, had been stuck in Parliament since last year, even as the BJP has offered its support to the bill.
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