‘NAVRATNA’ STATUS FOR FOUR CPSEs

TAG: GS 3: ECONOMY

THE CONTEXT: Union Finance Minister Nirmala Sitharaman recently approved the elevation of four Central Public Sector Enterprises (CPSEs) to ‘Navratna’ status.

EXPLANATION:

• This prestigious classification has been awarded to Railtel Corporation of India, Solar Energy Corporation of India (SECI), Satluj Jal Vidyut Nigam (SJVN), and National Hydroelectric Power Corporation (NHPC).
• The move brings the total number of Navratna CPSEs in India to 25, reflecting the government’s commitment to strengthening key public sector enterprises and enhancing their operational autonomy.

Navratna Status

• The Navratna status is a recognition given to select CPSEs that demonstrate significant performance and potential.
• The status grants these enterprises enhanced autonomy in financial and operational matters, enabling them to make independent decisions in areas such as capital expenditure, investments in joint ventures or subsidiaries, mergers and acquisitions, and human resources management.
• This autonomy allows Navratna companies to operate with agility and respond swiftly to market opportunities, positioning them to become global giants.

Criteria for Navratna Status

• To be eligible for Navratna status, a CPSE must meet several stringent criteria. These include:
  • Miniratna I Classification: The enterprise must already hold the Miniratna I status, indicating a proven track record of profitability and operational efficiency.
  • Schedule ‘A’ Status: The CPSE must be classified as Schedule ‘A,’ denoting its significance and size within the public sector.
  • Performance Ratings: The enterprise must have obtained ‘excellent’ or ‘very good’ Memorandum of Understanding (MOU) ratings in three of the last five years, indicating consistent performance and adherence to agreed objectives.
  • Composite Score: The CPSE must achieve a composite score of 60 or above in six selected performance indicators, reflecting its operational strength and financial health.

Profiles of Newly Designated Navratna CPSEs

• Railtel Corporation of India
  • Railtel Corporation of India, a key CPSE under the Ministry of Railways, has demonstrated robust financial performance.
  • For the financial year 2023-24, Railtel reported an annual turnover of Rs 2,622 crore and a net profit of Rs 246 crore.
  • As the 23rd Navratna, Railtel’s new status will enable it to enhance its capabilities and expand its service offerings, particularly in the field of telecommunications and network infrastructure, where it plays a vital role.
• Solar Energy Corporation of India (SECI)
  • SECI, under the Ministry of New and Renewable Energy, has been a driving force in India’s renewable energy sector.
  • With a cumulative awarded capacity of 69.25 gigawatts (GW) and an annual power trading volume exceeding 42 billion units, SECI is at the forefront of India’s efforts to increase renewable energy capacity and meet climate goals.
  • In the financial year 2023-24, SECI achieved a consolidated annual turnover of Rs 13,118.68 crore, a 20.85 percent increase from the previous year, and a profit after tax (PAT) of Rs 510.92 crore, reflecting a 34.89 percent growth.
  • The Navratna status will provide SECI with greater flexibility to expand its operations, adopt advanced technologies, and enhance its geographical presence.
• National Hydroelectric Power Corporation (NHPC)
  • NHPC, a prominent player in the hydropower sector, operates under the Ministry of Power.
  • The company reported an annual turnover of Rs 8,405 crore and a net profit of Rs 3,744 crore for the financial year 2023-24.
  • With Navratna status, NHPC will gain increased operational freedom, enabling it to optimize its project execution capabilities and explore new opportunities in the renewable energy domain.
• Satluj Jal Vidyut Nigam (SJVN)
  • SJVN, also under the Ministry of Power, focuses on the development of hydroelectric power projects.
  • For FY 2023-24, SJVN reported an annual turnover of Rs 2,833 crore and a net profit of Rs 908 crore.
  • As a newly designated Navratna, SJVN will benefit from enhanced autonomy, allowing it to accelerate its growth trajectory, explore new markets, and enhance its project management capabilities.

Impact of Navratna Status on CPSEs

• Enhanced Autonomy and Growth Opportunities
  • The Navratna status is designed to empower CPSEs with greater autonomy, allowing them to operate more like private sector companies in terms of decision-making and operational efficiency.
  • This autonomy enables these enterprises to undertake large-scale investments, enter into joint ventures, and pursue mergers and acquisitions without requiring prior government approval, thereby expediting growth and expansion.
  • The increased flexibility also allows Navratna CPSEs to attract and retain top talent, improve their financial management practices, and enhance their technological capabilities.
• Strategic Importance of Navratna CPSEs
  • Navratna CPSEs are considered strategic assets for the country, given their role in critical sectors such as energy, infrastructure, and telecommunications.
  • By elevating these enterprises to Navratna status, the government aims to boost their competitiveness, ensure their long-term sustainability, and contribute to the nation’s economic growth.
  • These companies are expected to lead by example, demonstrating the potential of public sector enterprises to operate efficiently and profitably.

Central Public Sector Enterprises (CPSEs)

• Central Public Sector Enterprises (CPSEs) in India are government-owned corporations where the government holds at least 51% of the equity.
• They are crucial for the Indian economy, contributing to various sectors, including heavy engineering, defense, and energy.
• Categories of CPSEs
• CPSEs are classified into three main categories based on their financial performance and operational autonomy:
  • Maharatna:
    • This is the highest status, allowing companies to make significant investments without government approval. To qualify, a company must have:
      • Navratna status
      • An average annual net profit of over ₹5,000 crore in the last three years
      • An average annual turnover of ₹25,000 crore or a net worth of ₹15,000 crore over the same period
  • Navratna:
    • • • This status grants companies the autonomy to invest up to ₹1,000 crore in a single project without prior government approval. To achieve Navratna status, a company must:
          • Be a Miniratna Category-I company
          • Have received ‘Excellent’ or ‘Very Good’ ratings in Memorandum of Understanding (MoU) for at least three out of the last five years
  • Miniratna:
    • • • • This category is divided into two subcategories:
            • Category I: These companies must have made a profit in the last three consecutive years, with at least one year’s pre-tax profit of ₹30 crore or more.
            • Category II: These companies must also show consistent profitability but have a lower threshold for capital expenditure autonomy, allowing them to incur capital expenditures of up to ₹300 crore or 50% of their net worth, whichever is lower, without government approval

SOURCE: https://www.business-standard.com/companies/news/fm-nirmala-sitharaman-approves-navratna-status-for-four-cpses-124083001383_1.html