Criteria for Maharatna

Eligibility criteria and procedure for grant of Maharatna status The Central PSUs meeting the following eligibility criteria are proposed to be considered for Maharatna status: y y y y y y Having Navratna status Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations An average annual turnover of more than Rs.25,000 crore during the last 3 years An average annual net worth of more than Rs.15,000 crore during the last 3 years An average annual net profit after tax of more than Rs.5,000 crore during the last 3 years Should have significant global presence/international operations

The procedure for grant of Maharatna status as well as their review is proposed to be similar to that in vogue for the grant of Navratna status. The introduction of the above scheme will not entail any additional expenditure on the part of the Government. Enhanced powers to Maharatna CPSUs The Boards of Maharatna CPSUs in addition to exercising all powers to Navratna CPSUs will exercise enhanced powers in the area of investment in joint ventures/subsidiaries and creation of below Board level posts. The Boards of Maharatna CPSUs will have powers to: y y Make equity investment to establish financial JVs and wholly owned subsidiaries in India or abroad and Undertake M&A, in India or abroad, subject to a ceiling of 15% of the net worth of the concerned CPSU in one project, limited to an absolute ceiling of Rs.5,000 crore (Rs.1000 crore for Navratna CPSUs). The overall ceiling on such equity investments and M&A in all projects put together will not exceed 30% of the net worth of the concerned CPSUs. In addition, the Boards of Maharatna CPSUs will have powers to create below Board level posts up to E-9 level.

Major Impact The main objective of the Maharatna Scheme is to empower mega CPSUs to expand their operations and emerge as global giants. Background The Government had introduced the Navratna scheme, in 1977, to identify CPSUs that had comparative advantages and to support them in their drive to become global giants. The Boards of Navratna CPSUs have been delegated powers in the areas of: y y Capital expenditure Investment in joint ventures / subsidiaries

y y

Mergers & acquisitions Human resources management

At present, there are 18 Navratna CPSUs. The current criteria for grant of Navratna status are size neutral. Over the years, some of the Navratna companies have grown very big and have considerably larger operations than their peers. It was felt that these CPSUs which are at the higher end of the Navratna category and have potential to become Indian Multinational Companies (MNCs) can be recognized as a separate class, i.e. Maharatna. The proposed higher category will act as an incentive for other Navratna companies, provide brand value and facilitate delegation of enhanced powers to CPSUs. PSUs like BHEL have been demanding more freedom to enable them take faster decisions. Major PSUs should be given more autonomy to take decisions on investment and resource mobilisation. Besides encouraging better performance, this will help them to tide over the current economic slowdown, said PGCIL CMD SK Chaturvedi. Seeking greater independence, nine (BHEL, HAL, BPCL, HPCL, SAIL, NMDC, PGCIL, REC and IOCL) out of 18 Navratna firms are understood to have demanded Maharatna status from the government.

Criteria for Navratna

Navratna status is conferred by Department of Public Enterprises. To be qualified as a Navratna, the company must obtain a score of 60 (out of 100). The score is based on six parameters which include net profit to net worth, total manpower cost to total cost of production or cost of services, PBDIT (Profit Before Depreciation, Interest and Taxes) to capital employed, PBDIT to turnover, EPS (Earning Per Share) and inter-sectoral performance. Additionally, a company must first be a Miniratna and have four independent directors on its board before it can be made a Navratna. Significance for Navratna The Navratna status is offered to PSEs, which gives a company enhanced financial and operational autonomy and empowers it to invest up to Rs. 1000 crore or 15% of their net worth on a single project without seeking government approval. In a year, these companies can spend up to 30% of their net worth not exceeding Rs. 1000 cr. They will also have the freedom to enter joint ventures, form alliances and float subsidiaries abroad. Navratna Companies (18 Nos.) y Bharat Heavy Electricals Ltd (BHEL) y Bharat Petroleum Corp Ltd (BPCL) y Coal India Ltd (CIL) y Gail (India) Ltd y Hindustan Aeronautics Ltd (HAL) y Indian Oil Corp Ltd (IOCL) y MTNL y NMDC y NTPC

y y y y y y y y y

Hindustan Petroleum Corp Ltd (HPCL) National Aluminium Company ONGC Power Finance Corp (PFC) Power Grid Corporation of India Ltd (PGCIL) Rural Electrification Corp (REC) Shipping Corporation of India Steel Authority of India (SAIL) and Bharat Electronics Ltd (BEL)

Criteria for Miniratna

Miniratnas can also enter into joint ventures, set subsidiary companies and overseas offices but with certain conditions. Miniratnas are divided into two categories. Category I PSEs that have made profits continuously for the last three years or earned a net profit of Rs. 30 crore or more in one of the three years. These miniratnas granted certain autonomy like incurring capital expenditure without government approval up to Rs. 500 crore or equal to their net worth, whichever is lower. Category II PSEs which have made profits for the last three years continuously and should have a positive net worth. It has autonomy to incurring the capital expenditure without government approval up to Rs. 300 crore or up to 50% of their net worth whichever is lower.

News
Maharatna status for top PSUs in 6 months, 21st Jan, 2010 (Business Line) The Union Heavy Industries Minister, Mr Vilasrao Deshmukh, said on Wednesday that the Government would soon set up a scrutiny committee for giving the Maharatna status to wellperforming public sector units (PSUs), which fall under the criteria laid down by the Cabinet on December 24. He added that the grant of the status to the selected PSUs should be completed within the next six months. We are in the process of setting up the committee and the state-owned companies will also have to meet the norms. I think in the next six months the job will be completed and they will get the new status, said the Minister, while speaking at the sidelines of the launch of BSE's Web site for PSUs. The Maharatna status, which is given to only top-performing PSEs, would give them larger autonomy.

In a first, big-four PSUs to pitch for Maharatna status, 3rd April, 2010 (Financial Express) In a first of sorts, the four PSU contenders for the coveted Maharatna status have been asked to present their case to the government. This is quite a departure from the existing process, where the department of public enterprises decides on giving more autonomy or Navratna status to eligible public sector companies. According to official sources, three PSUs Indian Oil Corporation (IOC), NTPC and Steel Authority of India Ltd (SAIL) have already made presentations before an inter-ministerial committee (IMC) on why they deserve the title. Upstream oil major ONGC is also expected to make a pitch before the high-level committee on Monday. IOC was not in the original list of aspirants. Senior officials from the department of expenditure, department of public enterprises, Planning Commission as well as the administrative ministries are represented on the IMC. Maharatna status will provide enhanced financial autonomy for PSUs for taking decisions relating to investments in joint venture companies and mergers and acquisitions. It is meant to help PSUs with a significant international presence to become global giants. Maharatna status will be reviewed by an apex committee headed by the Cabinet Secretary. Significantly, all four companies have increased their international presence in recent years. While ONGC and IOC are looking for opportunities abroad to acquire oil and gas assets, NTPC and SAIL are hunting for captive coal blocks in foreign lands. ONGC has seen serious constraints in financing OVLs acquisitions of oil and gas assets abroad because of investment ceilings. As a Navratna company, ONGCs investment in any OVL project cannot exceed Rs 1,000 crore. But the Maharatna status will raise this limit to Rs 5,000 crore. As per the earlier programme, ONGCs case was to be taken up by the committee first. But that could not happen due to non-availability of the ONGC chairman and senior officials of the petroleum ministry. So, the presentation was rescheduled for April 5. Each applicant has to convince the IMC that it has indeed a strong case for grant of Maharatna status and that it is not seeking the tag just because it meets the minimum criteria laid by the government. For example, IMC can ask the applicant what it would do if it is granted the Maharatna status. Besides, the applicant will also be quizzed about how it utilised the Navratna status. As per the criteria set by the government, a Navratna PSU applying for Maharatna status should be listed on stock exchange. It should also have average turnover of more than Rs 25,000 crore during the last three years, networth of more than Rs 15,000 crore and net profit over Rs 5,000 crore during past three financial years. Besides, it should have significant global presence.