Maharatna, Navaratna, and Miniratna are designations conferred upon select public sector enterprises (PSEs) in India, distinguishing them based on their performance, potential, and strategic importance. These classifications serve as markers of prestige and come with a range of benefits and privileges granted by the Indian government. Maharatna companies, the highest tier, are giants in the public sector, recognized for their exceptional size, scale of operations, and global competitiveness. Navaratna companies follow closely, exhibiting significant prowess in their respective industries and demonstrating robust growth prospects. Miniratna companies, while smaller in comparison, showcase promise and potential for further expansion and development. Together, these designations represent a tiered system aimed at fostering excellence, efficiency, and growth within India’s public sector landscape.
Maharatna, Navaratna, and Miniratna Companies:
Maharatnas: The Maharatna Scheme was introduced in 2010 to empower the boards of identified large-sized Navratna CPSEs. To be eligible for Maharatna status, a CPSE must:
- Have Navratna status.
- Be listed on an Indian stock exchange.
- Have an average annual turnover during the last three years of more than ₹25,000 crore.
- Have an average annual net worth during the last three years of more than ₹15,000 crore.
- Have an average annual net profit after tax during the last three years of more than ₹5,000 crore.
- Demonstrate significant global presence or international operations.
Delegation of Powers: Maharatna CPSEs, in addition to Navratna powers, are delegated additional powers in the areas of investment in joint ventures/subsidiaries and human resources development. Maharatna CPSEs can invest ₹5,000 crore in one project (₹1,000 crore for Navratna CPSEs).
Current Maharatna CPSEs:
- Bharat Heavy Electricals Limited (BHEL)
- Bharat Petroleum Corporation Limited (BPCL)
- Coal India Limited
- GAIL (India) Limited
- Hindustan Petroleum Corporation Limited (HPCL)
- Indian Oil Corporation Limited (IOC)
- NTPC Limited
- Oil & Natural Gas Corporation Limited (ONGC)
- Power Grid Corporation of India Limited (PGCIL)
- Steel Authority of India
Recent Additions: Hindustan Petroleum and Power Grid Corporation were granted Maharatna status in October 2019 by the Department of Public Enterprises under the Ministry of Heavy Industry and Public Enterprises.
Department of Investment and Public Asset Management (DIPAM):
The Department of Disinvestment, established in 1999, underwent changes and was upgraded to the Ministry of Disinvestment in 2001. Subsequently, in 2004, it became a department once again under the Ministry of Finance. In 2016, the department was renamed the Department of Investment and Public Asset Management (DIPAM). DIPAM’s key functions include:
- Management of Central Government Investments:
- Handles all matters related to the management of the central government’s investments in equity, including disinvestment of equity in Central Public Sector Enterprises (CPSEs).
- Decision-Making:
- Makes decisions on recommendations from administrative ministries, NITI Aayog, etc., for disinvestment, including strategic disinvestment.
- CPSE-related Decisions:
- Deals with decisions on CPSEs for government investment in equity, such as capital restructuring, bonus, dividends, disinvestment of government equity, and other related issues.
- Provides advice to the government on financial restructuring of CPSEs and attracting investment in these enterprises through the capital market.
Miniratna Companies:
Miniratna is a status conferred by the Government of India to certain Public Sector Enterprises (PSEs) to grant them a degree of operational and financial autonomy. As of now, there are over 70 Miniratna companies. These companies have a level of autonomy, allowing them to undertake certain activities like entering into joint ventures, establishing subsidiary companies, and setting up overseas offices. However, their autonomy is comparatively lesser than that of Navratnas.
Autonomy Measures for PSEs:
In a market economy with intense competition, granting autonomy to PSEs becomes crucial for their effective functioning. Various measures have been taken to ensure autonomy for PSEs, including:
- Maharatnas, Navaratnas, and Miniratnas Status: PSEs are categorized into Maharatnas, Navaratnas, and Miniratnas based on certain criteria, and each category is granted a specific level of autonomy.
- Memorandum of Understanding (MoU): MoUs are signed between the government and PSEs, outlining performance targets and expectations. This allows PSEs to operate with greater flexibility.
- Disinvestment: The government may divest a portion of its equity in PSEs, which not only raises funds but also brings in a level of private participation and accountability.
- Professionalization of Boards: Inducting outside professionals as non-official directors on the boards of PSUs is a crucial step toward improving corporate governance. The number of non-official directors is typically required to be at least one-third of the actual strength of the board.
Professionalization of PSU Boards:
The professionalization of PSU boards involves the induction of outside professionals as non-official directors. Key points in this regard include:
- Number of Non-Official Directors: At least one-third of the board’s strength should consist of non-official directors.
- Navratna/Miniratna Package: Under the Navratna/Miniratna package, select PSUs have been professionalized by inducting a minimum of four non-official directors in the case of Navratnas and three in the case of Miniratnas.
- Limit on Government Directors: The number of government directors on the board is restricted, typically not exceeding two.
These measures collectively aim to enhance the efficiency, accountability, and competitiveness of PSEs in a dynamic market environment.
Memorandum of Understanding (MoU):
The Memorandum of Understanding (MoU) is a policy tool introduced to measure and improve the performance of public enterprises. Its origins can be traced back to the recommendations of the Arjun Sengupta Committee in the mid-eighties. The committee proposed the introduction of the MoU system to assess the performance of public enterprises.
Key Points:
- Introduction and Experimentation (1987-88): The MoU system was initially introduced on an experimental basis in 1987-88. It operates on the principle that the unit agrees to achieve specific results in exchange for autonomy. The performance of the unit is then evaluated based on its adherence to the obligations and commitments outlined in the MoU.
- Ranking and Autonomy: The performance ranking achieved by the unit under the MoU system determines the level of autonomy granted. Higher performance rankings lead to greater autonomy for the unit.
- Objective of the MoU System: The MoU system addresses several challenges faced by public sector enterprises, including:
- Multi-Point Accountability: PSEs often face challenges in efficient performance due to multi-point accountability.
- Clarity of Objectives: The absence of clear objectives hampers performance.
- Functional Autonomy: Lack of functional autonomy affects overall performance.
- Categories of Performance: The performance of the company under the MoU system is categorized into five levels: excellent, very good, good, fair, and poor.
- Coverage of Performance Aspects: The MoU covers both financial and non-financial performance aspects. This comprehensive approach ensures a holistic evaluation of the company’s performance.
- Objectives of the MoU System:
- Increase Autonomy and Accountability: Enhance the autonomy and accountability of management through clearly defined performance targets at the beginning of the year.
- Evaluate Managerial Performance: Enable the evaluation of managerial performance using objective criteria.
- Reward Good Performance: Provide a mechanism to reward good performance through performance incentives, thereby stimulating improved performance.
The MoU system is designed to create a structured framework for measuring, incentivizing, and enhancing the performance of public enterprises, fostering a culture of accountability and efficiency.
FAQs
1. What are Maharatna, Navaratna, and Miniratna Companies?
- Answer: Maharatna, Navaratna, and Miniratna are classifications of public sector enterprises in India, based on their financial performance and operational excellence. These classifications are conferred by the Government of India to recognize and incentivize companies for their significant contributions to the economy.
2. How many Maharatna Companies are there in India?
- Answer: As of [insert latest year], there are [number] Maharatna Companies in India. These elite enterprises have been granted greater autonomy and financial powers to compete effectively in the global market.
3. What criteria determine the classification of Navaratna Companies?
- Answer: Navaratna Companies are selected based on various parameters including operational efficiency, financial performance, global competitiveness, and strategic vision. Additionally, they must fulfill certain criteria set by the Department of Public Enterprises, Government of India, to qualify for this prestigious status.
4. Can Miniratna Companies invest in joint ventures and subsidiaries without government approval?
- Answer: Yes, Miniratna Companies enjoy enhanced autonomy in decision-making, including the freedom to invest in joint ventures, subsidiaries, and strategic alliances without seeking prior approval from the government. This autonomy empowers them to explore growth opportunities and expand their market presence.
5. How do Maharatna Companies contribute to India’s economy?
- Answer: Maharatna Companies play a pivotal role in driving economic growth and development in India. With their vast resources, advanced technologies, and global presence, they contribute significantly to various sectors such as energy, infrastructure, telecommunications, and more. Their initiatives foster innovation, create employment opportunities, and contribute to the overall prosperity of the nation.
In case you still have your doubts, contact us on 9811333901.
For UPSC Prelims Resources, Click here
For Daily Updates and Study Material:
Join our Telegram Channel – Edukemy for IAS
- 1. Learn through Videos – here
- 2. Be Exam Ready by Practicing Daily MCQs – here
- 3. Daily Newsletter – Get all your Current Affairs Covered – here
- 4. Mains Answer Writing Practice – here