new delhi the bjp and the government are close to resolving their differences over increasing the foreign investment cap in insurance to 49 from the current 26 marking a significant breakthrough in the reformlinked legislation that has been hanging fire for close to a decade the two sides are negotiating a middle ground where fdi limit is raised to 49 with the rider that voting rights will be pegged at 26 this will replicate the norms in the banking sector where the government had unsuccessfully tried to bring voting rights at par with holdings with a 20 cap on voting rights discussions between finance minister p chidambaram and bjp leaders sushma swaraj arun jaitley and yashwant sinha on saturday went over possible scenarios acceptable to bjp which has opposed increase in the foreign investment capthe move will also enable foreign institutional investors to enter the insurance space bjp had so far insisted that the recommendations of parliaments standing committee on finance pegging fdi at 26 be accepted by the government while chidambaram pressed for the cap to be hiked to 49 this is the first time that the principal opposition has relented if with an important caveat on its opposition to chidambarams pitch the proposal to raise the cap for insurance dates back to when nda was in power as finance minister yashwant sinha had recommended that the fdi cap be kept at 26 while allowing another 23 through the fii route the indian promoter would have been allowed to pare his holdings through a public issue after 10 years of operation the formulation was altered to suit indian promoters although some players such as icici prudential managing director and ceo sandeep bakshi welcomed the prospect of an understanding between the government and the bjp several in the industry believe the proposal will not encourage longterm investors such as overseas insurance companies the cap on voting rights is a compromise and it seems that they government and the bjp will be happy with a stillborn baby we have to understand that india has to compete for capital with other countries and the india story is no longer as compelling as it used to be with voting rights capped at 26 foreign players will remain minority shareholders and will become mere portfolio investors companies managing business actively will not accept this formula and rather than expecting inflows there may actually be exits pnb metlife md rajesh relan said in contrast bakshi said it is positive as it allows another category of investors to have a play in the indian space apart from a tussle over the specifics of the proposal the differences widened because of the animosity that came to define congressbjp ties the lack of chemistry between chidambaram and sinha was another impediment although equations have improved there are other drivers for a compromise that may be in the offing congress is determined to push for reform measures in order to revive sagging economic sentiments while bjp leadership is more