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Informist, Thursday, Oct. 17, 2024

 

By Sagar Sen and Krity Ambey

 

NEW DELHI - The government is looking to give more autonomy to the boards of all public sector companies with 'Ratna'-status, especially for decisions related to investment, a senior finance ministry official said. The aim is to expedite business operations of the companies and help them take decisions faster, the official added.

 

The limits that are currently being followed are outdated and there is a need to relook them, the official told Informist. "We are looking to streamline the powers of the companies. We want to make it more broad-based," the official said. Under the existing framework, the boards of Maharatna companies have powers to make equity investments up to 30% of their net worth, subject to a limit of INR 50 billion per project. "We would like to tweak the limit here," the official said. 

 

According to Department of Public Enterprises website, currently there are 100 'Ratna'-status central public sector enterprises that include 13 Maharatna companies. This week Hindustan Aeronautics Ltd. said it has been granted Maharatna status by the government, taking the total to 14.

 

The government introduced the Navratna concept in 1997 to identify and support public sector companies with competitive advantages so that they become global companies. The system enables the board of central public sector enterprises' powers related to capital expenditure, joint ventures, and human resource management.

 

In 2010, the government decided to introduce a new classification of Maharatna to delegate more powers to the boards of select large-sized Navratna companies. "This higher status incentivises other Navratna companies, enhances brand value, and allows for delegation of greater powers to CPSEs, fostering further growth and international competitiveness," the government had said.

 

At present, Maharatna companies can make equity investments to establish financial joint ventures and wholly-owned subsidiaries and undertake mergers and acquisitions, in India or abroad, subject to a ceiling of 15% of the net worth of the concerned CPSE, limited to INR 50 billion in one project. The overall ceiling on such investments in all projects put together will not exceed 30% of the net worth of the concerned CPSE.

 

The boards of these companies are also enabled to raise debt from the domestic capital markets and from international market, the latter being subject to the approval of the Reserve Bank of India or Department of Economic Affairs, and should be obtained through the administrative ministry.

 

The government would like to start the delegation of higher autonomy with Maharatna companies, then relax the guidelines for the 25 Navratna and 62 Miniratna companies, the official said. This will also make the management more accountable, the official added.

 

The finance ministry is also working on new guidelines on capital management of public sector units, which may be announced shortly. Last year, the state-owned companies were allowed to pay dividends to the government on a proportionate basis in case their subsidiary had other stakeholders, and they did not pay dividends in proportion of stake held by different shareholders.  End

 

Edited by Vandana Hingorani

 

 

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