Maharashtra leads protest to Centre

MUMBAI, OCT 21: Maharashtra, along with seven other state governments, has lodged a strong protest against the amendments to the State Fin...

MUMBAI, OCT 21: Maharashtra, along with seven other state governments, has lodged a strong protest against the amendments to the State Financial Corporations Act promulgated by the Centre last month. The states have said the Centre was directly encroaching on the rights of the states.

“We feel that the centre should reconsider the amendments since despite more than 50 per cent shares, we will have less say in the appointment of the chairman or the managing director of the Maharashtra State Financial Corporation,” Chief Minister Vilasrao Deshmukh said in a letter to Prime Minister Atal Behari Vajpayee.

The Centre on September 12, 2000, amended the State Financial Corporations Act to provide for the appointment of the chairman and managing director with the approval of the Small Industries Development Bank (SDBI). Before the amendment, the power to make these appointments was vested in the state governments who would do it in consultation with the Industrial Development Bank of India (IDBI). Meaning, whereas the states only needed to consult the IDBI earlier, now they require the approval of the SDBI.

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“Following the amendments, the entire board of directors of the Maharashtra State Financial Corporation led by chairman Dilip Sopal stood dissolved and now we are awaiting instructions from the SDBI. The amendment appears to be bad in law. When we have more than 50 per cent shares, it will be improper for the SDBI or any central agency to interfere in the appointment to the key positions,” a senior official of the industries department said.

Moving the amendment in Parliament, Finance Minister Yashwant Sinha had submitted that in view of the economic reforms, it was essential to equip the State Financial Corporations with emerging environment, enlarge their shareholder base, provide them with greater functional economy and operational flexibility.

As per the amendments unanimously passed by Parliament, the share capital held by the Industrial Development Bank of India in the State Financial Corporation will be transferred to Small Industries Development Bank of India and the restrictions on issue of sale or bonds, debentures and borrowing money have been removed.

In addition, the ceiling on the amount of assistance has been increased, more autonomy has been given to the State Financial Corporation in regard to investment of funds and the general body of shareholders of the State Financial Corporations has been vested with more powers.