Two major Indian Public Sector Undertakings (PSUs)—Bharat Heavy Electricals Limited (BHEL) and Steel Authority of India Limited (SAIL)—are facing imminent danger of demotion, as they have been put on one-year notice to either improve their financial performance or lose their “Maharatna” tag.
They have been clearly told that their failure to meet profit targets could see them being downgraded from Maharatna to Navratna status.
Besides, both the concerned ministries—Ministry of Heavy Industries and Ministry of Steel—have been instructed to present a detailed plan on how BHEL and SAIL could deal with issues such as weak financial performance, including low profitability.
As per an official assessment, both BHEL and SAIL have been failing to meet the criteria of having an average annual profit after tax (PAT) of more than ₹5,000 crore during the last three years.
Incidently, these two are the only companies among the 14 Maharatnas that have been failing to meet the required parameters.
The other parameters involve an average turnover of more than ₹25,000 crore and a net worth of over ₹15,000 crore in the preceding three years and “a significant global presence or international operations.”
Being downgraded means lowering the autonomy of the company boards, as Maharatnas can make equity investments of up to ₹5,000 crore without government approval. But for Navratnas, the limit is ₹1,000 crore.
This is the first case of Maharatnas being put on notice with the threat of a status downgrade after it was recommended by a committee headed by Cabinet Secretary TV Somanathan.
This high-powered committee had conducted a re-evaluation of Central Public Sector Enterprises (CPSEs) last year and recommended several measures to improve their performance, including the imposition of stricter financial parameters and tougher corporate governance requirements and having the option of stripping a CPSE of its ‘Ratna’ status. It reviewed the Maharatna categorisation to revise it with contemporary market dynamics.
The message is clear: the Ratna status cannot be taken for granted, and any significant deviation from the prescribed criteria will result in a downgrade. The Centre has already tightened annual performance rules for CPSEs, with strict penalties for failing to meet Corporate Social Responsibility (CSR) obligations, delaying payments to Micro, Small, and Medium Enterprises (MSMEs), and failing to prepare a succession plan. These parameters are fixed annually.
Somanathan called for a wider scrutiny and asked the Department of Public Enterprises (DPE) to rework the eligibility criteria of PSUs to be upgraded to Maharatnas. So, a performance review of all public sector companies is to be carried out by the DPE on the basis of the reworked criteria.
The Ministry of Steel informed the panel that SAIL’s average annual turnover was more than ₹1 lakh crore for the last four years and its average net worth was ₹53,976 crore. SAIL last met the threshold of ₹5,000 crore average annual PAT for three years in 2022-23.
Similarly, the Niti Aayog observed BHEL’s human resource policies as “a major constraint” in its growth and said those required a comprehensive examination.
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