Power minister P Kumarmangalam, communications minister Sushma Swaraj, HRD minister Murli Manohar Joshi were amongst those who opposed the proposal.

The finance ministry's initiative was shot down not because the members of the cabinet were opposed to foreign equity stake in insurance, but they took objection to the definitions provided by the ministry on what is an "Indian company" who will be allowed to make a foray into the insurance sector.

Well-placed sources in the cabinet said that the finance ministry had put forward three elaborations of an Indian company -- first, is a company registered in India with equity capital owned by Indians, second, is a joint venture company registered in India with the foreign partnerholding a 26 per cent stake which can go up to 40 per cent and, third, a company registered in India but whose shareholding is owned by a foreigner or a foreign company.

BJP ministers in the cabinet raised their voices in a chorus against the third definition given by the ministry. The finance ministry was accused by some of the members of the cabinet of allowing 100 per cent equity participation by "foreigners or foreign companies". "This would have amounted to a full back door entry for foreign companies in the insurance sector," a cabinet minister told The Financial Express.

When it was pointed out that the third definition did not make sense in the light of the earlier elaboration of an `Indian company' which allows for a foreign stake of only 26 per cent which can go up to 40 per cent, the minister said, "this is precisely what we debated about and pointed out in the cabinet meeting." He went on to add, "The finance ministry's definition of allowing 100 per cent equity participation by foreigncompanies or foreigners was apparently only an enabling provision but we are opposed to any such caveats."

The BJP cabinet minister said that a "Maruti-type situation will arise if a foreign company is allowed to take its equity up to 40 per cent". But more than anything else, the BJP leaders felt that allowing foreign equity in insurance sector itself would be tantamount to a volte face from their stated position earlier and then to allow a foreign company to hike its stake to as high as 40 per cent would be indefensible.

With the cabinet opposing these key provisions of the IRA Bill, the possibility of the Bill being placed for consideration of parliament in the current session is ruled out.