Finance minister Jaswant Singh was able to pass his sixth bill through Lok Sabha in the current session today with the house passing the Companies (Second Amendment) Bill 2001.
The Bill, approved by a voice vote, enables cooperative institutions to voluntarily transform themselves into companies enabling them to compete with other enterprises on an equal footing.
Replying to the discussion, Singh said the bill would allow cooperatives to convert themselves into a company. He said the Bill also allowed reconversion of these companies back into a cooperative.
The Bill will allow multi-state cooperatives to tap the equity market to raise additional resources for their expansion.
Singh said to ensure that the new entities do not dilute their ownership the bill has a rider that members cannot trade in their equity in the market but can only transfer them with the approval of the producer company's board of directors.
He said this would ensure that producer companies would not be vulnerable to the takeover by multinationals or other companies.
Only existing members of the cooperatives can hold equity in the new avatar of these cooperatives.
Passage of the bill would enable large scale cooperatives like Gujarat Milk Marketing Federation to finance their expansion plans. It would also facilitate easier flow of bank finance into the sector.
Participating in the discussion, Priya Ranjan Dasmunsi of Congress expressed apprehension that the legislation would allow the MNCs to enter the sector. In fact, the legislation was a step towards allowing foreign direct investment, he said.
