SAIL and BHEL may lose their ‘Maharatna’ status, what does it mean for these big government companies…

New Delhi. The central government has put two big government companies – Steel Authority of India Limited (SAIL) and Bharat Heavy Electricals Limited (BHEL) – on a one-year ‘watchlist’. These companies failed to meet the key financial criteria required to retain ‘Maharatna’ status.

According to a report in ‘Economic Times’, if these two government companies are not able to improve their financial performance in the stipulated time, then they can be brought to the status of ‘Navratna’ companies. This will happen for the first time since the introduction of ‘Maharatna’ status.

Why has notice been given to BHEL and SAIL?

According to ET, both the companies failed to meet the requirement of maintaining an average annual profit (after tax – PAT) of more than Rs 5,000 crore during the last three years.

However, these companies meet other eligibility criteria, such as average annual turnover of more than Rs 25,000 crore, net worth of more than Rs 15,000 crore and a large international presence; But their profits have been less than the fixed benchmark.

According to ET report, Cabinet Secretary T.V. A committee headed by Somanathan reviewed the performance of central public sector enterprises (CPSEs) and recommended putting BHEL and SAIL on notice.

What does ‘Maharatna’ status mean?

‘Maharatna’ is the highest status given to Central Public Sector Enterprises. This status gives company boards greater financial and operational independence, allowing them to take investment decisions faster without having to seek repeated government approvals.

At present, there are 14 ‘Maharatna’ CPSEs in India, which include companies like Oil and Natural Gas Corporation, Coal India Limited and Indian Oil Corporation.

What will happen if the status is reduced?

The transition from ‘Maharatna’ to ‘Navratna’ status will reduce the financial powers of the boards of BHEL and SAIL. ‘Maharatna’ companies can themselves approve equity investments up to Rs 5,000 crore without seeking government approval. In contrast, ‘Navratna’ companies can approve investments only up to Rs 1,000 crore.

This means that downgrading may limit companies’ ability to undertake large expansion projects, acquisitions or strategic investments, as they may have to seek additional approval from the government. Government is increasing surveillance on PSUs
This step is part of a larger effort by the government to improve the standards of accountability and performance in government companies.

According to ET, the central government has already tightened the rules for annual performance appraisal for CPSEs. Companies can now face fines if they do not meet Corporate Social Responsibility (CSR) responsibilities, delay payments to Micro, Small and Medium Enterprises (MSMEs), or do not make succession plans for senior management positions.

According to ET, officials said the “gem” status should not be considered forever and the status could be downgraded if there is significant deviation from the set norms.

Why is the government reviewing the norms?

During the review process, NITI Aayog representatives pointed out that the financial thresholds for attaining Maharatna status were set in 2010 and have not been updated to keep pace with inflation and changes in the size of the economy.

As reported by ET, the committee has asked the Department of Public Enterprises (DPE) to re-examine the eligibility criteria based on the 2025 price level and then review all CPSEs under the changed framework.

What are BHEL and SAIL doing to improve performance?

The ministries overseeing both companies have been instructed to submit detailed plans to improve profits and operational performance.

According to ET, the steel ministry told the review panel that SAIL’s average annual turnover in the last four years was more than Rs 1 lakh crore, while its average net worth was about Rs 54,000 crore. However, the company last crossed the three-year average PAT (profit after tax) threshold of Rs 5,000 crore in FY23.

In the case of BHEL, NITI Aayog reportedly cited human resource policy as a major obstacle to growth. The Ministry of Heavy Industries told the committee that a roadmap has already been prepared to strengthen the financial performance of the company.

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