Central Power PSEs cannot exercise delegated powers in respect of projects of their subsidiaries

  • October 31, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Central Power PSEs cannot exercise delegated powers in respect of projects of their subsidiaries

Subject: Economy

Context:

The Department of Public Enterprises (DPE) has said that Maharanta, Navratna, and Miniratna Central Power PSEs cannot exercise delegated powers in respect of projects of their subsidiaries.

Details:

  • Navratna CPSE – Oil India (OIL)  queried whether it can approve the projects of NRL (a subsidiary company of OIL) by exercising the power under the Navratna scheme.
  • The Department clarified that the Boards of Maharatna, Navratna, and Miniratna CPSEs have been delegated certain financial and operational powers which can be exercised in respect of projects of concerned CPSEs only and not for their subsidiaries.

Concept:

What is Maharatna, Navratna and Miniratna status?

  • The government has granted enhanced powers to the Boards of profit-making CPSEs under various schemes like Maharatna, Navratna and Miniratna.
  • They are granted greater autonomy for flexibility in respect of capital expenditure, formation of strategic alliance, formulation of HR policies, raising capital from domestic and international markets etc.

Miniratna scheme

  • It was introduced in October 1997.
  • It aims to grant enhanced autonomy and delegation of financial powers to some profit making companies subject to certain eligibility conditions and guidelines to make them efficient and competitive.
  • These companies, called Miniratnas, are in two categories, namely, Category- I and Category-II.
    • Category-I CPSEs should have made profit in the last three years continuously, the pre-tax profit should have been Rs 30 crore or more in at least one of the three years and should have a positive net worth.
    • Category-II CPSEs should have made profit for the last three years continuously and should have a positive net worth.
  • Presently, there are 74 Miniratnas (Airport Authority, Hindustan Copper, HLL Lifecare, Cochin Shipyards, and Chennai Petroleum, among others).
  • Criteria for grant of Miniratna status to CPSEs:
    • Miniratna Category-I status: – The CPSEs which have made profit in the last three years continuously, pre-tax profit is Rs.30 crores or more in at least one of the three years and have a positive net worth are eligible to be considered for grant of Miniratna-I status.
    • Miniratna Category-II status: – The CPSEs which have made profit for the last three years continuously and have a positive net worth are eligible to be considered for grant of Miniratna-II status.
  • A Miniratna category gets the enhanced delegated power provided it has not defaulted in the repayment of loans/interest payments on any loans due to the Government.

Navratna scheme

  • The government introduced the Navratna scheme in 1997.
  • Powers and privileges–Similar to Maharatna but with a lower limit in terms of investment made.
    • It can make equity investments to establish financial joint ventures and wholly owned subsidiaries in India or abroad and undertake mergers and acquisitions, in India or abroad, subject to a ceiling of 15 percent of the net worth with a ceiling of ₹1,000.
    • Capital expenditure
    • Investment in joint ventures/subsidiaries
    • Mergers & acquisitions
    • Human resources management, etc.
  • Eligibility criteria for grant of Navratna status
    • The CPSEs which are Miniratna I, Schedule ‘A’ and have obtained ‘excellent’ or ‘very good’ MOU rating in three of the last five years and
    • Have a ‘Composite Score’ of performance to be 60 or above in six identified performance parameters are eligible to be considered for grant of Navratna status.
      • Net Profit to Net worth
      • Manpower Cost to total Cost of Production or Cost of Services
      • PBDIT to Capital employed
      • PBIT to Turnover
      • Earning Per Share
      • Inter Sectoral Performance
  • There are 13 Navratna( Hindustan Aeronautics Limited, Shipping Corporation, REC, NMDC, and NBCC, among others)

Maharatna scheme

  • It  was introduced in 2010
  • It aims to empower mega CPSEs to expand their operations and emerge as global giants.
  • Powers and privileges:
    • The Board can make equity investments to undertake financial joint ventures and wholly-owned subsidiaries and undertake mergers and acquisitions in India and abroad, subject to a ceiling of 15 percent of the networth of the concerned CPSE or Rs 5,000 crore (whichever is lower).
    • The board can also structure and implement schemes relating to personnel and human resource management and training.
    • It  can also enter into technology joint ventures or other strategic alliances.
    • It can incur capital expenditure on the purchase of new items or for replacement, without any monetary ceiling.
    • It is allowed to obtain technology and know-how by purchase or other arrangements.
  • Eligibility criteria for grant of Maharatna status
    • Having Navratna status.
    • Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
    • An average annual turnover of more than Rs 25,000 crore during the last three years.
    • An average annual net worth of more than Rs 15,000 crore during the last three years.
    • An average annual net profit after tax of more than Rs 5,000 crore during the last three years.
    • Should have significant global presence/international operations.
    • It can raise debt from the domestic capital markets and from the international market, the latter being subject to the approval of RBI/Department of Economic Affairs.
  • There are 11 Maharatnas ( NTPC, GAIL, ONGC, BHEL, and IOC, among others)
Central Power PSEs cannot exercise delegated powers in respect of projects of their subsidiaries economy