Following India’s independence, the government began nationalising some companies and even establishing its own, known as Public Sector Undertakings (PSUs), to regain public trust. These government-backed companies went on to become one of the top competitors for private businesses. As a result, PSUs have become a household name and hold significant value in the eyes of the general public.
As public trust is gradually restored, the government may seek to monetize it by selling to other corporations. The government recognised several key companies operating in strategic sectors. Companies are graded based on both their performance and the government’s eligibility criteria. In this article, we will look at Navaratna companies and their benefits.
What Is Navratna And Its Eligibility?
The term “Navratna stock” refers to a select set of Indian public sector organizations (PSUs) that have been granted increased autonomy and operational flexibility by the government. In Sanskrit, the name ‘Navratna‘ means ‘nine jewels’ and represents perfection and distinction.
To be classified as a Navratna PSU, a corporation must meet specific requirements established by the Department of Public Enterprises (DPE). These criteria often include profitability, net worth, and market capitalization.
The company must have been a miniratna category-1 for at least three years, a consistent track record for profitability, net worth, and turnover, positive net worth and net profit for the previous three years, a global presence or international operations, the ability to compete in the global market, good corporate governance and compliance with regulatory requirements, and a satisfactory DPE rating.
Navratna firms can invest up to Rs 1,000 crore, or 15% of their net value, in a single project. The other alternative is 30% of their net worth, which should not exceed Rs. 1,000 crore.
Some of the corporations played important roles in the Indian economy in sectors such as energy, manufacturing, defense, and infrastructure, greatly contributing to national development and industrial progress.
Why Indian Government Recognises These Companies Under This Status?
Once certified as a Navratna, these enterprises receive tremendous operational and financial autonomy, allowing them to make decisions without having to seek previous government clearance for operations such as investments, joint ventures, and mergers.
Based on operational efficiency, competitiveness, and autonomy. Navratna status gives these PSUs decision-making flexibility, allowing them to invest, form joint ventures, and merge without prior government clearance.
Navratna’s status strives to increase the efficiency and effectiveness of these public sector undertakings by encouraging modern management methods and operational flexibility. This, in turn, increases their domestic and international competitiveness, helping India’s economy flourish.
These PSUs’ competitiveness and efficiency can be improved by lowering bureaucratic barriers and encouraging a more business-focused approach. It also enables them to compete more successfully in domestic and international markets, resulting in increased growth and profitability.
This autonomy removes bureaucratic barriers, allowing faster responses to market opportunities and difficulties. Financially, Navratna PSUs have greater freedom to raise capital and facilitate larger-scale projects and expansions that support national development goals in sectors including as energy, infrastructure, defense, and manufacturing.
Overall, Navratna’s status reflects the government’s policy of empowering major PSUs to act more like private businesses while maintaining public ownership. This method aims to promote innovation, growth, and sustainability in India’s industrial landscape.
Can The Underperformance Of Businesses Degrade Their Status?
It is determined by a company’s underperformance, which has the potential to lower its Navratna status. To keep this designation, businesses must often achieve certain criteria, such as financial performance, operational efficiency, and corporate governance norms.
If a Navratna company persistently underperforms in financial indicators (such as profitability, sales growth, and return on investment), fails to achieve government targets, or has substantial operational concerns, it may lose its Navratna designation.
The government assesses Navratna firms’ performance regularly and has the authority to cancel their status if they no longer fulfill the acceptable standards or fail to improve over time. As a result, underperformance can lead to a corporation losing its Navratna status. DPE chief once said regarding the downgrading of PSUs if they don’t perform and till now there is no PSU which has not faced downgrade.
List Of PSUs Which Turned Into Navartna PSUs
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