Eligibility Criteria for Grant of Maharatna, Navratna and Miniratna Status to CPSEs

Recently ‘Maharatna’ status has been granted by the Government to state-owned Hindustan Petroleum Corporation Limited and Power Grid Corporation of India Limited. Focus on Criteria for Prelims , delegation of powers is optional read.  The eligibility criteria laid down by the Government for grant of Maharatna, Navratna and Miniratna status to Central Public Sector Enterprises (CPSEs) are following:

Criteria for grant of Maharatna status :-

 The CPSEs fulfilling the following criteria are eligible to be considered for grant of Maharatna status.
  • (i)   Having Navratna status.
  • (ii)  Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
  • (iii) Average annual turnover of more than Rs. 25,000 crore, during the last 3 years.
  • (iv) Average annual net worth of more than Rs. 15,000 crore, during the last 3 years.
  • (v)   Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
  • (vi) Should have significant global presence/international operations.

Delegation of powers to Maharatna CPSEs

The Boards of Maharatna CPSEs have been delegated the following powers:
  • To incur capital expenditure on purchase of new items or for replacement, without any monetary ceiling
  • To enter technology joint ventures (JVs) or strategic alliances
  • To obtain technology and know-how by purchase or other arrangements
  • To effect organizational restructuring including establishment of profit centre, opening of offices in India/abroad, creating new activity centres etc.
  • To create below Board level posts up to E-9 level and to wind up all below Board level posts. The Boards of Directors of these CPSEs will have powers to make all appointments, effect internal transfers and re-designation of all below Board level posts.
  • To structure and implement schemes related to personnel and human resource management and training
  • To raise debt from the domestic capital markets and international markets, the latter being subject to the approval of RBI/Department of Economic Affairs, as may be required. Approval for the same should be obtained through the administrative Ministry.
  • To make equity investment to establish financial JVs and wholly owned subsidiaries and undertake mergers and acquisitions (M&As) in India or abroad, subject to a ceiling of 15% of the net worth of the concerned CPSE, limited to Rs.5.000 crore in one project. The overall ceiling on such investments in all projects put together will not exceed 30% of the net worth of the concerned CPSE. While normally the investment would be done directly by the parent CPSE, in cases where it proposes to invest through a subsidiary into another JV, and also provide the additional capital for this purpose, the above stipulations would be in the context of the parent company.
  • The Board of Directors shall have the powers for M&As, subject to the conditions that (a) it should be as per the growth plan and in the core area of functioning of the CPSE and (b) the Cabinet Committee on Economic Affairs (CCEA) would be kept informed in case of investments abroad. Further, the powers relating to M&As should be exercised in such a manner that it should not lead to any change in the public sector character of the concerned CPSEs.
  • CMD is empowered to approve international business tours of functional Directors up to 5 days duration (other than study tours, seminars, etc.) in emergency, under intimation to the Secretary of the Administrative Ministry.
  • Holding companies are empowered to transfer assets, float fresh equity and divest shareholding in subsidiaries subject to the condition that the delegation will only be in respect of subsidiaries set up by the holding company under the powers delegated to Navratna/Maharatna CPSEs and further to the proviso that a) the public sector character of the concerned CPSE (including subsidiary) would not be changed without prior approval of the Government, and b) such Maharatna CPSEs will be required to seek Government approval before exiting from their subsidiaries.

Criteria for grant of Navratna status :-

The Miniratna Category – I and Schedule ‘A’ CPSEs, which have obtained ‘excellent’ or ‘very good’ rating under the Memorandum of Understanding system in three of the last five years, and have composite score of 60 or above in the six selected performance parameters, namely,
  • (i) net profit to net worth,
  • (ii) manpower cost to total cost of production/services,
  • (iii) profit before depreciation, interest and taxes to capital employed,
  • (iv) profit before interest and taxes to turnover,
  • (v) earning per share and
  • (vi) inter-sectoral performance.

The powers presently delegated to the Boards of Navratna PSUs are as under:

  • To incur capital expenditure on purchase of new items or for replacement, without any monetary ceiling
  • To enter into technology joint ventures or strategic alliances
  • To obtain by purchase or other arrangements, technology and know-how
  • To effect organisational restructuring including establishment of profit centers, opening of offices in India and abroad, creating new activity centres, etc.
  • Creation and winding up of all posts including and upto those of non Board-level Directors, i.e. Functional Directors, who may have the same pay scale that of Board level Directors, but who would not be members of the Board. All appointments upto this level would also be in the powers of the Boards and would include the power to effect internal transfers and redesignation of posts
  • To further delegate the powers relating to Human Resource Management (appointments, transfer, posting etc) of below Board level executives to sub-committees of the Board or to executives of the CPSE, as may be decided by the Board of CPSE.
  • To raise debt from the domestic capital markets and for borrowings from international market, which would be subject to the approval of RBI/Department of Economic Affairs as may be required and should be obtained through the administrative ministry.
a. Rs 1000 crore in any one project
    • To establish financial joint ventures and wholly owned subsidiaries in India or abroad with the stipulation that the equity investment of the CPSE should be limited to the following:-
    • b. 15 % of the net worth of the CPSE in one project
    • c. 30 % of the net worth of the CPSE in all joint ventures/subsidiaries put together
  • To undertake mergers and acquisitions, subject to the conditions that (i) it should be as per the growth plan and in the core area of functioning of the CPSE, (ii) conditions/limits would be as in the case of establishing joint ventures/subsidiaries, and (iii) the Cabinet Committee on Economic Affairs would be kept informed in case of investments abroad.
  • To approve business tours abroad of functional directors upto 5 days duration (other than study tours, seminars, etc) in emergency, by the Chief Executive or the CPSE under intimation to the Secretary of the Administrative Ministry. In all other cases including those of Chief Executive, tours abroad would continue to require the prior approval of the Minister of the Administrative Ministry/Department.

Criteria for grant of Miniratna status :-

The Miniratnas (I and II)

  • In October 1997, the Government decided to grant enhanced autonomy and delegation of financial powers to some other profit making companies (other than the Navratnas) subject to certain eligibility conditions and guidelines to make them efficient and competitive.
  • These categories were Category I and Category II

1. Category I CPSEs

    • should have made profit in the last three years continuously,
    • the pre-tax profit should have been Rs. 30 crore or more in at least one of the three years and
    • should have a positive net worth.

2. Category II CPSEs

    • should have made profit for the last three years continuously and
    • should have a positive net worth.

These CPSEs have enhanced delegated powers provided they meet the following eligibility conditions and criteria:

  • 1. They have not defaulted in the repayment of loans/interest payment on any loans due to the Government
  • 2. These public sector enterprises shall not depend upon budgetary support or Government guarantee.
  • 3. The Boards of these CPSEs should be restructured by inducting at least three non-official Directors as the first step before the exercise of enhanced delegation of authority.
  • 4. The administrative ministry concerned shall decide whether a public sector enterprise fulfilled the requirements of a category I/category II company before the exercise of enhanced powers.

The delegation of decision making authority available at present to the Boards of these Miniratna CPSEs is as follows:

  1. Capital Expenditure
    1. CPSEs Category I: The power to incur capital expenditure on new projects, modernisation, purchase of equipment etc., without Government approval upto Rs. 500 crore or equal to net worth, whichever is less.
    2. CPSEs Category II: The power to incur capital expenditure on new projects, modernisation, purchase of equipment etc., without Government approval upto Rs. 250 crore or equal to 50 % of the net worth, whichever is less.
  2. Joint Ventures and Subsidiaries
    1. CPSEs Category I: The power to incur capital expenditure on new projects, modernisation, purchase of equipment etc., without Government approval upto Rs. 500 crore or equal to net worth, whichever is less.
    2. CPSEs Category II: The power to incur capital expenditure on new projects, modernisation, purchase of equipment etc., without Government approval upto Rs. 250 crore or equal to 50 % of the net worth, whichever is less.
  3. Mergers and Acquisitions
    The Board of Directors of these CPSEs have the powers for mergers and acquisitions, subject to the conditions that (i) it should be as per the growth plan and in the core area of functioning of the CPSE, (ii) conditions/limits would be as in the case of establishing joint ventures/subsidiaries, and (iii) Cabinet Committee on Economic Affairs would be kept informed in case of investments abroad
  4. Scheme for HRD
    The Board of Directors of these CPSEs have the powers to structure and implement schemes relating to personnel and human resource management, training, voluntary or compulsory retirement schemes, etc. The Board of Directors of these CPSEs has the power to further delegate the powers relating to Human Resource Management (appointments, transfers, postings, etc). of below Board level executives to subcommittees of the Board or to executives of the CPSE, as may be decided by the Board of the CPSE.
  5. Tour Abroad of Functional Directors
    The Chief Executives of these CPSEs have the power to approve business tours abroad of functional directors upto 5 days, duration (other than study tours, seminars, etc) in emergency, under intimation to the Secretary of the administrative ministry. In all other cases including those of Chief Executive, tours abroad would continue to require the prior approval of the minister of the Administrative Ministry/Department.
  6. Technology Joint Ventures and Strategic Alliances
    The Board of Directors of these CPSEs have the powers to enter into technology joint ventures, strategic alliances and to obtain technology and know-how by purchase or other arrangements, subject to government guidelines as may be issued from time to time.
  7. The above delegation of powers is subject to similar conditions as are applicable to Navratna CPSEs.
Source: Department of Public Enterprises (as on March, 2018) https://pib.gov.in/newsite/mbErel.aspx?relid=107091

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