BHEL and SAIL may lose their Maharatna status.
The government has given one year’s notice to public sector companies Bharat Heavy Electricals Limited (BHEL) and Steel Authority of India Limited (SAIL) to improve their financial performance. If their performance does not improve, the status of these Maharatna companies can be reduced to Navratna. According to a government assessment, BHEL and SAIL do not meet the criteria of average annual profit after tax (PAT) of more than Rs 5,000 crore in the last three years. Among the 14 Maharatna companies, this is the only company which has failed to meet the required parameters.
Other requirements include an average turnover of more than Rs 25,000 crore in the last three years and net worth of more than Rs 15,000 crore, and “large global presence or international operations”. If the status is reduced, the autonomy of the company board will be reduced. Maharatna companies can make equity investments up to Rs 5,000 crore without government approval. For Navratna companies this limit is Rs 1,000 crore.
this happened for the first time
This is the first case when notice has been given to Maharatna companies with a warning to reduce their status. In both cases, a committee headed by Cabinet Secretary TV Somanathan made this recommendation. The Committee last year re-evaluated the Central Public Sector Enterprises (CPSEs) and suggested a number of measures to improve their performance, including imposing stringent financial parameters and stringent corporate governance requirements and the option to strip any CPSE of its ‘Ratna’ status. It reviewed the Maharatna category to make changes as per the current market conditions.
The rules have been made strict
A senior official said in the ET report that Ratna status cannot be taken lightly and any major deviation from the set criteria will result in downgrading. The central government has already tightened annual performance norms for CPSEs, with stringent penalties for non-fulfillment of corporate social responsibility (CSR) obligations, delay in payments to micro, small and medium enterprises (MSMEs) and failure to prepare succession plans. As per the parameters for assessing the performance of CPSEs in FY27, any deviation from mandatory CSR activities or MSME procurement rules will result in full deduction of marks for these performance parameters. These parameters are decided every year.
Comprehensive review on ‘Gems’
According to NITI Aayog representatives who attended the meetings, the limits on turnover, net worth and PAT were fixed in 2010, and “they have not been adjusted or revised according to actual values.” Seeking a comprehensive review, Somanathan asked the Department of Public Enterprises (DPE) to “rework the eligibility criteria for granting Maharatna status to government companies, so that by 2025 Actual prices can be shown based on prices. After this, the performance of all public sector companies will be reviewed by DPE based on the new criteria.
turnaround plan
The ministries of heavy industries and steel have been directed to submit a detailed plan on how BHEL and SAIL can deal with problems like poor financial performance including low profits. During the assessment, the steel ministry told the panel that SAIL’s average annual turnover in the last four years was more than Rs 1 lakh crore and its average net worth was Rs 53,976 crore. SAIL last met the average annual PAT threshold of Rs 5,000 crore for three years in 2022-23. NITI Aayog considered BHEL’s human resource policies as “a major hindrance” to its growth and said they needed a comprehensive review. An official of the Ministry of Heavy Industries told the committee that “a plan has been prepared to improve the financial performance of BHEL”.
