Mumbai: The Maharashtra government has set up its Asset Reconstruction Company (ARC) – becoming the first state to do so – on the lines of a similar branch of the central government, primarily with the intention of improving the health of cooperative institutions in the state.
The company named Maha ARC Limited has been formed for the restructuring of those firms – co-operative societies, semi-government companies, public companies etc. – which are in or on the verge of financial crisis, and with which the Government of Maharashtra has a direct relationship. .
Speaking to ThePrint, Manoj Saunik, head of Maha ARC and additional chief secretary in the state finance department, said: “When it comes to the financial health of Maharashtra government corporations, they are not defaulting on their loans. The Asset Reconstruction Company will be especially useful for the many cooperatives – sugar factories, spinning mills and so on – that run into loan defaults, and the state government, being the guarantor for the loan, has to step in. ,
“We have applied for a license from the Reserve Bank of India to operate as an asset reconstruction company. We are yet to receive it,” he said.
Saunik also said that Maharashtra is the first state to set up such an asset reconstruction branch.
The ARC move is also politically significant, as the cooperative sector in Maharashtra has traditionally been dominated by Congress and Nationalist Congress Party (NCP) leaders, with the Bharatiya Janata Party (BJP) now part of the state government. . Alliance with Shiv Sena faction led by CM Eknath Shinde – Trying to violate Citadel.
A finance department official told ThePrint on the condition of anonymity: “Last year, the central government formed the National Asset Reconstruction Company (NARCL) to restructure loans of institutions under financial crisis. The finance department thought it would be a good idea to implement a similar concept at the state level.”
NARCL has been set up by banks, in which public sector banks hold 51 per cent stake in the company, to take over and restructure stressed assets of banks and financial institutions. However, unlike NARCL, Maha ARC is wholly owned by the Government of Maharashtra.
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Starting capital of Rs 111 crore
The Maharashtra government on Monday incorporated Maha ARC Limited with an initial capital of Rs 111 crore. The government has issued orders to release this capital from the State Contingency Fund.
The official mentioned earlier told ThePrint that the Maha ARC will endeavor to restructure “any sick company, quasi-government companies, which often do not operate transparently, public companies, cooperatives, etc. any kind of relationship”.
“There are different ways in which the Maharashtra government is dealing with such companies. The state government has either given them land or equity investment, or subscribed to their shares, donated or given loans, or is a guarantor for their loans,” the official said.
“The restructuring of such companies will help in protecting the interest of the shareholders, members and beneficiaries of the company concerned and even the public,” he said.
Saunik said Maha ARC will not run the troubled companies, but will try to sell or dispose of its assets. “In a way, it may also be known that companies dependent on the state government for debt and loan payments will be more responsible in conducting their business,” he said.
The Maha ARC will have a board of eight members, of whom six will be government officials. According to a proposal issued by the state finance department, the representatives of the government would be additional chief secretary of finance, secretary financial reforms, principal secretary of expenditure, additional chief secretary and principal secretary of cooperative department. Department of Textiles and Industry. Apart from these members, there will be two independent directors.
(Edited by Nida Fatima Siddiqui)