How Do Companies Get Maharatna and Navratna Status? Complete Explanation Here

The Maharatna and Navaratna are prestigious statuses granted to certain public sector enterprises (PSEs) that signify their financial strength, operational autonomy, and strategic importance to the economy.

However, obtaining these statuses is not an easy feat, as companies must meet specific criteria set by the government in order to be eligible for such recognition. 

It may take years of consistent growth, innovation, and contribution to the economy for a company to be considered for Maharatna or Navaratna status. Here is the proper explanation of how Indian companies can achieve Maharatna or Navaratna status.

What are Maharatna and Navratna Companies?

Maharatna and Navratna are special statuses given to certain government-owned companies in India, known as Public Sector Enterprises (PSEs). These statuses help these companies operate more independently and make significant investments without needing constant government approval.

Maharatna Status

Maharatna means "great jewel." These companies are among the largest and most successful in India.

Eligibility Criteria:

To qualify as a Maharatna, a company must meet the following criteria:

• Must already have Navratna status.
• Listed on Indian stock exchanges with minimum prescribed public shareholding.
• Average annual net profit after tax of over ₹5,000 crore during the last three years.
• Average annual turnover of ₹25,000 crore or average annual net worth of ₹15,000 crore over the same period.
• Must have a global presence or international operations.

Navratna Status

Navratna companies can invest up to ₹1,000 crore in projects without needing prior government approval, allowing for greater flexibility in decision-making.

Eligibility Criteria:

To be classified as a Navratna company, an enterprise must:

• Be a Miniratna-I company with a positive net worth.
• Have obtained an "Excellent" or "Very Good" Memorandum of Understanding (MoU) rating in three out of the last five years.
• Achieve a composite score of 60 or more in selected performance indicators24.

Investment Autonomy:

Navratna companies can invest up to ₹1,000 crore in projects without needing prior government approval, allowing for greater flexibility in decision-making.

What are the main differences between Maharatna and Navratna companies?

How to apply for Maharatna or Navratna status?

To apply for Maharatna or Navratna status in India, public sector enterprises (PSEs) must follow specific steps and meet certain eligibility criteria. Here’s a simplified guide:

Steps to Apply for Maharatna Status

Achieve Navratna Status:

• A company must first hold Navratna status.

Meet Financial Criteria:

• Average annual turnover of more than ₹25,000 crore over the last three years.
• Average annual net worth of more than ₹15,000 crore during the same period.
• Average annual net profit of more than ₹5,000 crore for the last three years.

Global Presence:

• The company should have significant international operations or global presence.

Public Listing:

• The company must be listed on an Indian stock exchange with the required public shareholding as per SEBI regulations.

Proposal Submission:

• The concerned Administrative Ministry/Department initiates the proposal after approval from financial advisors and ministers.

Inter-Ministerial Committee Review:

• The proposal is processed by the Department of Public Enterprises (DPE) and reviewed by an Inter-Ministerial Committee (IMC).

Final Decision:

• The recommendations from the IMC are forwarded to the Minister for a final decision.

Steps to Apply for Navratna Status

Become a Miniratna:

• A company must first achieve Miniratna status. To apply for Miniratna status, a Public Sector Enterprise (PSE) must meet specific criteria. The company should have made profits continuously for the last three years and possesses a positive net worth. Additionally, it should not have defaulted on loan repayments to the government. The application is submitted through the concerned Administrative Ministry, which evaluates the eligibility based on these guidelines.

Board Composition:

• The company must have at least four independent directors on its board. Here’s a breakdown of the typical roles within the board:

Performance Evaluation:

• Achieve a composite score of 60 or above out of 100 based on six performance parameters, including net profit, net worth, and manpower cost.

Proposal Submission:

• Similar to Maharatna, the proposal must be initiated by the Administrative Ministry/Department.

Review and Approval:

• The proposal is reviewed by the DPE and then by the IMC before being sent to the Minister for approval.

In Case You Missed| Latest List of Maharatna and Navratna Companies in India 2024

What is the Role of the Department of Public Enterprises (DPE)?

The Department of Public Enterprises (DPE) is a key part of the Indian government's Ministry of Finance. Its main role is to oversee and improve the performance of public sector enterprises (PSEs) in India. Here’s a simple breakdown of its functions:

Key Roles of DPE

1. Policy Formulation: DPE creates guidelines and policies that govern how public sector companies operate. This helps ensure they are efficient and accountable.
2. Performance Monitoring: The department regularly assesses the performance of PSEs to ensure they meet set standards and improve over time.
3. Autonomy Support: DPE helps grant various levels of autonomy to PSEs, such as Maharatna, Navratna, and Miniratna statuses, which allow them to make significant decisions without constant government oversight.
4. Coordination with Ministries: It acts as a bridge between the government and public enterprises, ensuring that the interests of both are aligned.
5. Guidance on Financial Matters: DPE provides advice on financial management and governance practices, helping PSEs operate more effectively.

Significance and benefits of achieving Maharatna or Navratna status

Achieving Maharatna or Navratna status is significant for public sector enterprises (PSEs) in India, offering numerous benefits that enhance their operational capabilities and financial autonomy.

Significance and Benefits

1) Enhanced Financial Autonomy:

• Navratna Status: Companies can invest up to ₹1,000 crore or 15% of their net worth in a single project without needing government approval. This allows for quicker decision-making and responsiveness to market conditions.
• Maharatna Status: Companies can invest up to ₹5,000 crore or 15% of their net worth on a project without prior approval, providing even greater financial flexibility.

2) Operational Freedom:

• Both Maharatna and Navratna companies can enter joint ventures, form alliances, and establish subsidiaries abroad. 
• This freedom enables them to expand their business operations globally and diversify their portfolios.

3) Improved Reputation:

• Achieving these statuses enhances the company's reputation, making it more attractive to investors and partners. 
• It signifies reliability and strong performance in the public sector.

4) Increased Competitiveness:

With greater autonomy and operational freedom, these companies can compete more effectively in both domestic and international markets, driving innovation and efficiency45.

5) Strategic Decision-Making:

• Boards of Maharatna and Navratna companies have enhanced powers in areas like capital expenditure, mergers, acquisitions, and human resource management. 
• This delegation allows for strategic decisions that align with long-term goals.

India has 13 Maharatna, 25 Navratna, and 62 Miniratna companies (which are further divided into categories 1 and 2). These statuses not only enhance financial autonomy and operational flexibility but also bolster the companies' reputations and competitiveness in the market. 

By empowering these enterprises to make strategic decisions without constant government oversight, they can innovate and respond effectively to changing economic conditions. 

Ultimately, Maharatna and Navratna companies play a crucial role in driving economic growth, fostering development, and contributing to the nation’s overall progress, making their success vital for India’s future.

Also Read| How Maharatna, Navaratna and Miniratna Status Granted to CPSEs?