Current Affairs 2022: Relevance of Maharatna Status of CPSEs

By Dinesh U

Recently Power Corporation of India was awarded the Maharatna Status. Read here details about the eligibility for Mahratna Status and the relevance of such status to Public Sector Enterprises.

In the year 2009, the government of India decided to establish Maharatna status for the central public sector enterprises or commonly known as PSE. The objective of this scheme was to offer enhanced powers to the boards of some selected large-sized Navratna CPSEs to facilitate the expansion of their operations both in domestic and global markets. This article discusses the objective, relevance, and other aspects of Maharatna status to public sector enterprises.

About special category status to Public Sector Enterprises

In India, the public sector enterprises are managed by the Department of Public Enterprises of the Ministry of Heavy Industries and Public Enterprises. The government grants the status of Navratna, Miniratna, and Maharatna to Central government Public Sector Enterprises. The allocation of status to these public sector enterprises is based on the performance and profit made by these Central Public Sector Enterprises. Navratna and Miniratna status have been in function since 1997. Maharatna status has been in use since 2009 and it is the latest intervention by the central government to promote and motivate public sector enterprises.

After the liberalization of the Indian economy, various public sectors have been given additional financial autonomy by the government. This special status is given to “public sector enterprises (PSE)” that have some advantages and autonomy to be more competitive. Most of the PSEs are industries from sectors like iron ore, steel, petroleum etc.

Status of Maharatna to public sector enterprises

After economic reforms of the 90s, various PSUs have been awarded additional financial autonomy as special status by the government. Presently, the government has categorized the status level of these public sector enterprises into 1) Maharatna 2) Navratna and 3) Miniratna category–I and category–II. Maharatna is the latest and highest level of status granted by the government to public enterprises.

Miniratna status schemes were initiated in 2009 but came into effect on 19^th May 2010. However, the objective behind the allocation of Maharatna status to PSE was to delegate more powers to the boards of selected large-sized navratna PSEs to promote the expansion of the operations, both in domestic as well as global market. Thus, Maharatna companies are identified as large-sized while Navratna satisfies the domestic and global market demands.

Eligibility/criteria for allocating the Maharatna Status to Public Sector Enterprises

The criteria laid down by the government for grant of maharatna status to central public sector enterprises is given below-
Should have Navratna status

• PSE must be listed on the Indian stock exchange with minimum prescribed public shareholding as per SEBI regulations.
• An average annual turnover of more than Rs. 25,000 crore in the last 3 years.
• An average annual net worth of more than Rs.15,000 crore in the last 3 years.
• Should have an average annual net profit (after tax) of more than Rs. 5,000 crore in the last 3 years.
• Should have significant global presence /international operations

List of PSE with Maharatna PSEs

1. Bharat Heavy Electricals Limited
2. Bharat Petroleum Corporation Limited (recently moved from Navratna to Maharatna)
3. Coal India Limited
4. Gas Authority of India Limited (India) Limited
5. Hindustan Petroleum Corporation Limited
6. Indian Oil Corporation Limited
7. National Thermal Power Corporation Limited
8. Oil and Natural Gas Corporation Limited
9. Power Grid Corporation of India Limited
10. Steel Authority of India Limited
11. Power Finance Corp. Ltd

Procedure for grant of Maharatna status

The procedure for grant of Maharatna status to a Navratna PSE is as follow-

• Firstly, the concerned administrative authority proposes for grant of Maharatna status to the Ministry of Public Enterprises
• Department of public enterprises process the proposal to Inter-Ministerial Committee
• The next step of the process is consideration of the proposal by an apex head by cabinet secretary
• The final decision is taken by the Minister of Heavy Industry and Public Enterprises

Benefits of the Maharatna Status

The Maharatna status provides enhanced autonomy and authority to a PSE than the other categories, such as Navaratna or Miniratna.
PSE having Maharatna status can invest from INR 1,000 crore to INR 5,000 crore

Maharatna PSE can invest 15% of its net worth in a project without prior permission from the government of India.

These PSE can also fill up most managerial positions of government clearance.

Besides the extra delegation listed above, Maharatna is empowered to enter technology joint ventures, organizational restructuring, raise debt, more delegation for Mergers and acquisitions, etc.

Review of performance of Maharatna PSE

The performance of Maharatna CPSE is revised annually by an inter-ministerial committee, thereafter by another apex committee. This apex committee decides on the continuation/disinvestment of Maharatna status. In case, the apex committee recommends disinvestment of Maharatna status of a PSE such recommendation is then placed before the Minister (Heavy Industry and Public Enterprises) for the final decision.

Recent policies of the government towards Public Sector Enterprises

Disinvestment is back in fashion as a tool of fiscal policy cautions; although, this time the government proposes to lower its equity holdings in a way that will not compromise the public character of the enterprises.

Recently, the government of India has notified a new “Public Sector Enterprises Policy” under which atomic energy, space, defence, trans and telecom, power, petrol, coal, other minerals, banking, insurance and financial services would be classified as strategic sectors and the remaining will be considered for privatization/merger/ closure/ and non –strategic sectors would be considered for privatization /closure.

However, the government stated that the ongoing strategic disinvestment of PSE won’t be affected by this policy.
Some facts to remember

There are 73 miniratna status PSEs in India (there are 2 categories in the list of maharatna PSEs).

• Presently, there are 16 PSE in India which are termed Navratna.
• There are a total of 10 Maharatna companies in India.
• Indian Oil Corporation is the largest profit-making Maharatna PSE.
• Navratna companies can spend less than 1000 crore without government approval.
• PSE in India is registered under section 8 of the Companies Act, 2013.
• Ministry of Finance’s Department of Public Enterprise is the apex managing authority of PSE status.

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About the Author:

   Dinesh is a lawyer and business law writer; loves to read History and do gardening. He has over one year of experience in content writing.