Making a strong case for raising FDI cap in insurance sector, Finance Minister P Chidambaram said on Monday the industry requires $5-6 billion capital in the immediate run.
"Every company already has 26 per cent FDI. So if you raise the cap from 26 per cent to 49 per cent, then there is a headroom for them to bring in more capital.
"The estimated capital requirement in insurance sector is about $5-6 billion in the immediate future," the minister told reporters.
The penetration ratio in life insurance sector is 4.4 per cent and 0.76 per cent in the non-life segment, meaning a vast majority of the population does not have insurance at all.
While the Cabinet last week approved an amendment to the Insurance Laws (Amendment) Bill, 2008, to raise the foreign direct investment in the sector from 26 per cent to 49 per cent, the proposal needs to be cleared by Parliament.
Chidambaram said the government intends to meet BJP and other parties ahead of the Winter Session to seek their support to raise the FDI cap to 49 per cent from the present 26 per cent as the sector require huge amount of capital.
He said 'by and large' the provisions of the insurance bill are along the lines recommended by the Standing Committe for Finance and he does not expect any opposition to the entire bill or the most of its clauses.
"The disagreement is only...to only one clause (related with FDI ceiling).
"On that clause, I expect a vigorous debate and I hope I will be able to convince the opposition parties. Even before the Parliament session, I intend to meet with the Principal Opposition party and other parties and ask for their support," the Finance Minister said.
The Standing Committee headed by senior Bharatiya Janata Party leader Yashwant Sinha had recommended to maintain the FDI ceiling at 26 per cent in the sector.
Increasing the FDI ceiling is a long standing demand of the industry and the sectoral regulator IRDA.
At present there are 23 private sector life and non-life insurance companies, besides state-owned LIC, GIC and four general insurance companies.
The state-run insurance companies will remain in the public sector.
The Insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act, 1999).