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ARTICLE: Autonomy to Public Sector Enterprises
Monday, 10 June 2013 04:16

Autonomy to Public Sector Enterprises

Backgrounder: Heavy Industries & Public Enterprises

The endeavour of the Government is to make Central Public Sector Enterprises (CPSEs) autonomous board managed companies.  Under Articles of Association, the Board of Directors of CPSEs enjoy autonomy in respect of recruitment, promotion and other service conditions of below board level employees.  The Board of Directors of a CPSE exercises delegated powers subject to board policy guidelines issued by Government has granted enhanced powers to the Boards of the profit making enterprises under various schemes like ‘Maharatna’, ‘Navratna’ and ‘Miniratna’ in the following  manner:

‘Maharatna’  Scheme:

The Government had introduced the ‘Navratna’ scheme,  in 1997, to identify Central Public Sector Enterprises (CPSEs) that had comparative advantages and to support them comparative advantages and to support them in their drive to become global giants.  The Boards of ‘Navratna’ CPSEs  have been delegated powers in the areas of (i)  capital expenditure,  (ii)     investment in joint ventures/subsidiaries,  (iv) human resources management, etc.

The current criteria for grant of ‘Narvatna’ status are size neutral.  Over the years, some of the ‘Navratna’ companies have grown very big and have considerably larger operations than their peers.  The CPSEs which are at the higher end of the ‘Navratna’ category and have higher end of the ‘Navratna’ category and have potential to become Indian Multinational Companies (MNCs), should be recognized as a separate classs, i.e. ‘Maharatna’.  The higher category will act as an incentive for other ‘Navratna’ companies, provide brand value and facilitate delegation of enhanced powers to CPSEs.

The new objective of the ‘Maharatna’ scheme is to empower mega CPSEs to expand their operations and emerge as global giants.  The ‘Maharatna’ Scheme will empower big sized CPSEs to expand their operations and emerge as global giants.

The CPSEs meeting the following eligibility criteria are considered for ‘Maharatna’ status:

a)         Having  ‘Navratna’ status.

b)         Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.

c)         An average annual  turnover of more than Rs. 25,000 crore during the last 3 years.

d)         An average annual net worth of more than Rs. 15,000 crore during the last 3 years.

e)         An average annual net profit after tax of more than Rs. 5,000 crore during the last 3 years.

f)         Should have significant global presence /international operations.

The procedure for grant of ‘Maharatna’ status as well as their review is similar to that in vogue for the grant to ‘Navratna’ status.

The Boards of ‘Maharatna’ CPSEs in addition  to exercising all powers to ‘Navratna’ CPSEs, will exercise enhanced powers in the area of investment in joint ventures/subsidiaries  and creation of below Board level posts. The Boards of ‘Maharatna’ CPSEs will have powers  to (a)  Make equity investment to establish financial joint ventures and wholly owned subsidiaries in India or abroad and (b) undertake mergers & acquisitions, in India or abroad, subject to a ceiling of 15%  of the net worth of the concerned CPSE in one project, limited to an absolute ceiling of Rs. 5,000 crore (Rs. 1,000 core for ‘Navratna’ (CPSEs).  The overall ceiling on such equity investments and mergers  and acquisitions in all projects put together will not exceed 30% of the net worth of the concerned CPSE.  In addition, the Boards of ‘Maharatna’ CPSEs will have powers to create below Board level posts up to E-9 level.

Presently there are seven ‘Maharatna’ CPSEs, viz. (i) Bharat Heavy Electricals Limited, (ii)           Coal India Limited, (iii)  GAIL (India) Limited, (iv)  Indian Oil Corporation Limited, (v) NTPC Limited, (vi) Oil & Natural Gas Corporation Limited and (vii)Steel Authority of India Limited. Bharat Heavy Electricals Limited and GAIL (India) Limited have been granted ‘Maharatna’ status during the year 2012-13.

‘Navratna’ CPSEs:

Under this scheme, the Government has enhanced powers delegated to CPSEs having comparative advantage and the potential to become global players.  Presently, there are 14 ‘Navratna’ CPSEs as under:

(i)         Bharat Electronics Limited

(ii)        Bharat Petroleum Corporation Limited

(iii)       Hindustan Aeronautics Limited

(iv)       Hindustan Petroleum Corporation Limited

(v)        Mahanagar Telephone Nigam Limited

(vi)       National Aluminium Company Limited

(vii)      Neyveli  Lignite Corporation Limited

(viii)     NMDC Limited

(ix)       Oil India Limited

(x)        Power Finance Corporation Limited

(xi)       Power Grid Corporation of India Limited

(xii)      Rashtriya Ispat Nigam Limited

(xiii)     Rural Electrification Corporation Limited

(xiv)     Shipping Corporation of India Limited.

‘Miniratna’ Scheme:

In October 1997, the Government had also decided to grant enhanced autonomy and delegation of financial powers to some other profit making companies subject to certain eligibility conditions and guidelines to make them efficient and competitive.  These companies called ‘Miniratnas’, are in two Category-II.  The eligibility conditions and criteria are:

(i) 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.

(ii) Category-II CPSEs should have made profit for the last three years continuously and should have a positive net worth.

(iii) These CPSEs shall be eligible for the enhanced delegated powers provided they have not defaulted in the repayment of loans/interest payment on any loans due to the Government.

(iv) These public sector enterprises shall not depend upon budgetary support or Government guarantees.

(v) 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.

(vi) 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.

Presently, there are 68 ‘Miniratna’ CPSEs (52 Category –I and 16 Category-II).  The concerned administrative Ministries/Departments have been requested to undertake an exercise to ensure that the existing ‘Miniratna’ CPSEs under their respective administrative control continue to fulfill the laid down criteria.