Government Owned Business in India

Navratna was the title given originally to nine Public Sector Undertaking (PSU) companies, identified by the Government of India in 1997 as its crown jewels or the most prestigious PSUs, which gave them greater autonomy, comparative advantages, and to support them in their drive to become global giants. The number of PSUs having Navratna status are now 18, the most recent addition being Coal India Limited. PSUs can be classified into Navratnas, Mahanavratnas, and Mininavratnas.

The significance of the ‘Navaratna’ status is that it gives the company enhanced financial and operational autonomy. The status empowers it to invest up to Rs. 1000 crores 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 status is conferred by Department of Public Enterprises. To be qualified as a Navratna, the company must obtain a score of 60 (of the total 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 must have four independent directors on its board before it can be made a Navratna. The following as the present 18 Navratna status PSUs

  • Bharat Electronics Limited
  • Bharat Heavy Electricals Limited
  • Bharat Petroleum Corporation Limited
  • Coal India Limited
  • GAIL (India) Limited
  • Hindustan Aeronautics Limited
  • Hindustan Petroleum Corporation Limited
  • Indian Oil Corporation Limited
  • Mahanagar Telephone Nigam Limited
  • National Aluminium Company Limited
  • NMDC Limited
  • NTPC Limited
  • Oil & Natural Gas Corporation Limited
  • Power Finance Corporation Limited
  • Power Grid Corporation of India Limited
  • Rural Electrification Corporation Limited
  • Shipping Corporation of India Limited
  • Steel Authority of India Limited

The Government of India has introduced a ‘MahaNavaratna’ status for PSUs. Although no PSUs have been conferred this status but this tag would allow the state-run firms to make investment decisions of up to Rs 5,000 crore (Rs 50 billion) without having to go to the government for approval. PSUs will have to meet the qualifying norm of Rs 30,000 crore or more turnover and at least Rs 5,000 crore net profit in the past three years besides an average net worth of Rs 15,000 crore. The new tag will give them greater autonomy to forge joint ventures, float overseas companies, and the freedom to decide on mergers and acquisitions of a particular size

In addition, the Government created another category called Miniratna. Miniratnas can also enter into joint ventures, set subsidiary companies and overseas offices but with certain conditions.

Category I Miniratna:
This designation applies to PSUs that have made profits continuously for the last three years or earned a net profit of Rs 30 crores or more in one of the three years. These Miniratnas are granted with certain autonomy like incurring capital expenditure without government approval up to Rs. 500 crores or equal to their net worth, whichever is lower. There are at present 48 Miniratnas under category I.

Category II Miniratna:
This category include those PSUs which have made profits for the last three years continuously and should have a positive net worth. Category II Miniratnas have autonomy to incurring the capital expenditure without government approval up to Rs. 300 crores or up to 50% of their net worth whichever is lower. There are in all 14 PSUs under category II of Miniratna.

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Significance Of Micro Businesses In India