Insurance amendment bill, which seeks to raise the FDI cap in the private sector insurance companies to 49 per cent from 26 per cent, is expected to be deferred to the next session.
"Insurance Bill will not come up in this session," a top government functionary said.
The Winter Session of Parliament that begun on November 22 will end on December 20.
The government had earlier listed the Bill among others that were to be taken up for consideration and passage.
The Insurance Laws (Amendment) Bill has been pending in the Rajya Sabha since December 2008. Because of the deferment of the insurance bill, the legislation to reform the pension sector is also likely to be delayed as the two are related.
As part of economic reforms, the government is keen to pass the Bill, but main Opposition party BJP is for keeping the FDI ceiling in the sector at 26 per cent. The Left Parties are opposing the Bill.
The Union Cabinet had cleared the draft Bill on October 4 as part of slew of measures to allow FDI in various sectors.
The Standing Committee headed by senior BJP leader Yashwant Sinha, which had scrutinised the Bill, was against raising the ceiling on FDI in the sector arguing that it would expose the sector to global vulnerability.
Earlier, Finance Minister P Chidambaram had said the insurance industry requires $5-6 billion capital in the immediate run.
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.
There are over two dozen private sector insurance companies operating in India in life and non-life sectors.