The Insurance Laws (Amendment) Bill, which provides for raising the foreign investment cap from 26 per cent to 49 per cent, was passed by the Lok Sabha after a short debate.
Minister of State for Finance Jayant Sinha, who piloted the Bill which has been pending since 2008, said the measure was crucial for the country as "our insurance penetration is low".
The bill will now have to pass the test of Rajya Sabha where BJP and its allies do not have majority and the government is critically dependent on the support of the Congress.
The bill, seeking to replace an Ordinance on the subject, is likely to be taken up by Rajya Sabha after the Holi holidays ending Sunday.
Realising the uphill task that the government will face in Rajya Sabha, government talked about convening a joint session to get it passed.
"If Insurance Bill is defeated in Rajya Sabha... it will open an opportunity for a Joint Session of Parliament," Jayant Sinha told reporters after the legislation was passed by Lok Sabha.
He hoped that Congress will support the bill in the Rajya Sabha. "We will have to see who supports it in the Rajya Sabha as BJP lacks numbers," Sinha said.
However, Congress, which brought the original bill way back in 2008, was ambiguous on supporting the measure.
Congress spokesman Abhishek Singhvi said his party is not against the bill per se but "We are opposed to the methodology, style and manner in which it has been brought bypassing Parliament."
He said his party was also against the fact that the government had changed the recommendations of the Select Committee which scrutinised the insurance bill.
At the same, Singhvi dismissed suggestion that the party had take a U-turn on the issue.
A senior Congress leader said in private that the best thing would be to keep the bill pending in the Rajya Sabha for long as its rejection could pave the way for a Joint Session.       

For any measure to be brought in the Joint Session, it needs to be approved by one house and rejected by the other.

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