Central Public Sector Enterprises (CPSEs), also known as Public Sector Undertakings (PSUs) are companies owned by the Union Government of India (GOI) or by one of the many states or territorial governments. CPSEs are vital to the Indian economy, contributing significantly to its industrial and economic development.
Classification of CPSEs
CPSEs are classified into three main categories based on their performance and various parameters:
1. Navratna
2. Miniratna
3. Maharatna
These categories provide varying degrees of financial autonomy and operational flexibility to the enterprises.
A. Navratna CPSEs
The Navratna status is awarded to CPSEs that have consistently performed well. It allows for greater financial and operational autonomy to compete globally.
Criteria for Granting Navratna Status:
-
- The CPSE must have Miniratna Category-I status along with Schedule ‘A’ listing.
- It should have at least three ‘excellent’ or ‘very good’ Memorandum of Understandings (MoUs) in the last five years.
- It must obtain a composite score of 60 out of 100 based on its performance during the last three years on six parameters:
- Net profit to net worth (Maximum 25)
- Manpower cost to cost of production or services (Maximum 15)
- Gross margin as a percentage of capital employed (Maximum 15)
- Gross profit as a percentage of turnover (Maximum 15)
- Earnings per share (Maximum 10)
- Inter-sectoral performance comparison based on net profit to net worth (Maximum 20)
- The CPSE should have four independent directors on its board.
Financial Autonomy:
Navratna CPSEs can invest up to 15% of their net worth in a single project without government approval, up to a maximum of ₹1,000 crore. The overall investment should not exceed 30% of the net worth of the CPSE.
List of Navratna CPSEs (as of 2022)
1. Bharat Electronics Ltd. (BEL)
2. Container Corporation of India Ltd. (CCIL)
3. Engineers India Ltd. (EIL)
4. Hindustan Aeronautics Ltd. (HAL)
5. Mahanagar Telephone Nigam Ltd. (MTNL)
6. National Aluminium Company Ltd. (NALCO)
7. NBCC (India) Ltd.
8. NMDC Ltd.
9. NLC India Ltd.
10. Oil India Ltd.
11. Power Finance Corporation Ltd. (PFC)
12. Rashtriya Ispat Nigam Ltd. (RINL)
13. Rural Electrification Corporation Ltd. (REC)
14. Shipping Corporation of India Ltd. (SCI)
B. Miniratna CPSEs
The Miniratna status is awarded to CPSEs based on their performance and profit-making capabilities. Miniratna CPSEs are divided into two categories: Category-I and Category-II.
Category-I Miniratna:
Must have made profits for the last three years continuously, with a pre-tax profit of ₹30 crore or more in at least one of these years.
Financial autonomy to incur capital expenditure without government approval up to ₹300 crore or equal to their net worth, whichever is lower.
Category-II Miniratna:
Must have made profits for the last three years continuously and have a positive net worth.
Financial autonomy to incur capital expenditure without government approval up to ₹150 crore or up to 50% of their net worth, whichever is lower.
Both categories can enter joint ventures and form subsidiaries under specific restrictions.
C. Maharatna CPSEs
The Maharatna status is the highest recognition given to CPSEs, providing them with greater financial and operational autonomy.
Criteria for Granting Maharatna Status:
-
- Must have Navratna status.
- Listed on the Indian stock exchange with a minimum prescribed public shareholding under SEBI regulations.
- Should have an average annual turnover of more than ₹25,000 crore in the last three years.
- Should have an average annual net worth of more than ₹15,000 crore in the last three years.
- Should have an average annual net profit after tax of more than ₹5,000 crore in the last three years.
- The company should have a significant global presence or international operations.
Financial Autonomy:
Maharatna CPSEs can invest up to 15% of their net worth in a single project, with an absolute ceiling of ₹5,000 crore without government approval. Overall, the investment in all projects should not exceed 30% of the net worth.
List of Maharatna CPSEs (as of 2022):
1. Bharat Heavy Electricals Ltd. (BHEL)
2. Bharat Petroleum Corporation Ltd. (BPCL)
3. Coal India Ltd.
4. GAIL (India) Ltd.
5. Hindustan Petroleum Corporation Ltd. (HPCL)
6. Indian Oil Corporation Ltd. (IOCL)
7. NTPC Ltd.
8. Oil & Natural Gas Corporation Ltd. (ONGC)
9. Power Grid Corporation of India Ltd.
10. Steel Authority of India Ltd. (SAIL)
Among the above, HPCL and Power Grid Corporation of India Ltd. are the most recent additions to the Maharatna status.
Importance of CPSEs in the Indian Economy
CPSEs play a critical role in the Indian economy by:
-
- Generating employment
- Contributing to GDP
- Developing infrastructure
- Ensuring the supply of essential goods and services
- Supporting strategic sectors such as defense, energy, and minerals
Challenges Faced by CPSEs
Despite their importance, CPSEs face several challenges, including:
-
- Bureaucratic inefficiencies
- Political interference
- Lack of autonomy in decision-making
- Outdated technology and practices
- Competition from the private sector and global players
Reforms and Future Outlook
-
- The government has initiated several reforms to enhance the efficiency and competitiveness of CPSEs, including:
- Disinvestment and strategic sale of non-performing CPSEs
- Encouraging public-private partnerships
- Modernizing infrastructure and adopting new technologies
- Enhancing operational autonomy through policy changes
Turnaround Story of PSUs in 2023-24
There are the 56 listed PSUs that are part of the BSE PSU index. These PSUs have posted a record combined profit of over five lakh crore rupees in FY24.
Spread the Word