NAVRATNA STATUS (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     3rd May 2024        
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Context: Recently, Indian Renewable Energy Development Agency public sector undertaking company was granted ‘Navratna status' from the department of public enterprises.

Navratna Status

  • Origin: The government introduced the Navratna scheme in 1997.
  • Categories of Public Sector Undertakings (PSUs): Maharatna, Navratna, and Miniratna.
  • Objectives: Under this scheme, the Boards of Navratna CPSEs have been delegated enhanced powers in the areas of:

o Capital expenditure

o Investment in joint ventures/subsidiaries

o Mergers & acquisitions

o 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.  The parameters are:

o Net Profit to Net worth

o Manpower Cost to total Cost of Production or Cost of Services

o Profit Before Depreciation Interest and Taxes(PBDIT) to Capital employed 

o Profit before interest and tax (PBIT) to Turnover

o Earning Per Share

o Inter Sectoral Performance

Benefits of Navratna Status:

  • Financial Independence: Navratna companies enjoy greater financial independence. They can invest up to ₹1,000 crore without seeking approval from the central government.
  • Investment Flexibility:  They are allowed to invest up to 15% of their net worth on a single project, or 30% of their net worth in a given year, subject to a cap of ₹1,000 crore.
  • Capital Expenditure Freedom: Navratna companies have the freedom to incur capital expenditure on purchasing new items or replacements without any monetary ceiling.
  • Strategic Alliances:  They can enter into technology joint ventures or strategic alliances to further their business goals.