Finance minister Yashwant Sinha has thrown open the insurance sector to Indian companies in this year's budget. But he has not defined what constitutes an Indian company. The cabinet is expected to define an Indian company on the basis of its equity structure. It will decide to what extent the equity of a company should be held with Indian nationals for it to be termed an Indian company.

The issue needs to be decided at the cabinet level because company- law experts say even a foreign company incorporated in the country is an Indian company. The ministry has also decided that the insurance sector will be open for two categories of businesses, life and non-life. It has nixed for now the third category - health insurance. Following the cabinet decision, the government will table the Insurance Regulatory Authority Bill inparliament which will confer statutory status on the body for regulating the industry.

The sector will be thrown open to domestic private companies after parliament also clears the LIC Act of 1956 and the GIC Act of 1974 for amendments. The two acts preclude the entry of private players in the insurance industry. ``We are looking at the possibility of tabling the three enactments in parliament next month,'' a senior finance-ministry official said.

The Malhotra Committee recommendations will form the broad framework for formulating guidelines for the private sector, sources said. The committee had suggested that the initial paid-up capital of a private company should be Rs 100 crore.

The ministry feels that the paid-up capital ought to be more than Rs 100 crore. The ministry is currently of the view that the IRA should issue licences. Senior ministry officials aver that they should not evaluate companies for issuing licences. However vested interests in the insurance division feel that the power ofconferring licences should rest with the ministry.

Unions in public-sector insurance companies allege that the government will give back-door entry to foreign firms, citing the telecom instance. When the telecom sector was opened up in 1994 the then Congress government had initially allowed Indian companies. But gradually foreign companies took up equity in these companies. Recently, foreign telecom companies like Hutchison and Spice have enlarged their equity positions by acquiring additional equity through newly formed subsidiaries in Mauritius.