MAHARATNA AND NAVRATNA - ARE THEY REALLY PRECIOUS?

By Ruma Dubey

Just as Emperor Akbar had accorded a status of Navratna to nine of his most prized and able ministers, the Indian Govt has accorded the same status, of being a priceless Navratna to some Public Sector Undertakings (PSUs) and are leaders in their own right in the Indian corporate world. But this was later split into two – Maharatna and Navratnas and the rest all fall in various criterions of Miniratnas.

 The Maharatnas includes:

1. Bharat Heavy Electricals Limited
2. Coal India Limited
3. GAIL (India) Limited
4. Indian Oil Corporation Limited
5. NTPC Limited
6. Oil & Natural Gas Corporation Limited
7. Steel Authority of India Limited

Then come the Navratnas. And these like all things Govt, this is confusing – aren’t ‘nav’ratna supposed to mean nine gems? Here, the Navratnas includes 17 companies:

1. Bharat Electronics Limited
2. BPCL
3. Hindustan Aeronautics Limited
4. HPCL
5. MTNL
6. National Aluminium Company Limited
7. NMDC Limited
8. Neyveli Lignite Corporation Limited
9. Oil India Limited
10. Power Finance Corporation Limited
11. Power Grid Corporation of India Limited
12. Rashtriya Ispat Nigam Limited
13. Rural Electrification Corporation Limited
14. Shipping Corporation of India Limited
15. Container Corporation of India
16. National Buildings Construction Company
17. Engineers India

 What makes a PSU Maharatna? Well, they first need to be a Navratna, after which they can graduate to this category. It has to be listed, with an average annual turnover of more than Rs. 20,000 crore during the last three years, an average annual net worth of more than Rs.10,000 crore during the last three years , an average annual net profit of more than Rs. 2,500 crore during the last 3 years and ‘significant’ global presence or international operations.

 And what happens once the company becomes a Maharatna? Well, it is stated to have greater financial and functional autonomy, get better valuation for shares. Also these companies can make investment decision of up to Rs. 5,000 crore without going to the government. This limit is Rs. 1,000 crore for Navratna firms.

That really sounds good, almost altruistic. But is this really what happens? Isn’t this autonomy notional? Or else, why is it that Coal India does not have freedom to peg its prices on market prices? Or remember the case of BHEL, where the CMD alleged that a Shiv Sena MP arm twisted him to  award a contract to a company of the MP's choice. The good news here though was that the Chairman did not budge and did not give in to this political pressure. See, we need to mention this specifically, that he did not budge….

 Thus it brings us to the question whether granting any status, even with the highest status of Maharatna, can these PSUs truly get the autonomy which they are promised of or does this remain merely on paper? Govt interference in PSU companies, especially when it comes to contracts and even recruitments is well known. There is no doubt that political leaders, when elected to the Board of these companies, fool themselves into thinking that they own the company and start running them like their personal fiefdom. These PSUs do not have the autonomy to even decide on how to use the huge pile of cash which the company sits on – with little money thus getting invested in modernizations and expansions. And this lack of financial independence does get reflected in the shoddy financial performances.

The oil companies  are doing well today only because of lower crude prices but no one can deny Govt interference. In fact the department of public enterprises (DPE) has time and again questioned the prized status of the public sector oil companies - IOC, HPCL and BPCL. According to the DPE, as these companies are now getting budgetary support in the form of oil bonds, how can they still remain either a Mahartana or a Navratna as this is in direct contravention of the guidelines of a Maha/Navratna company.

The Oil Ministry has defended its stand by stating that since it is the decision of the government to hold the price-lines of the oil products, the partial compensation should not be considered as a budgetary support for the purpose of navratna performance review. But then even on the performance front, these companies have not done too well and if that is indeed a criteria, then the call by the DPE certainly deserves to be paid heed to.

 So is India really operating in a professional atmosphere? The Govt is bending itself backwards to prove it all and sundry that India is a progressive country and it gives complete independence to its companies to operate in an environment of free economy. Is that really true?  

India is a predominantly poor country (a visit to a shopping mall on weekends might change that perception though!) and hence there is a need to subsidise. But the Govt always using the wagon of subsidies to get political mileage, paying no heed to the bottomlines of the companies, bleeding them to death, is callous to say the least. Textiles, sugar, fertilizers, coal, oil; what more will be gobbled up by the avaricious Indian political machinery…..