Maharatnas - Indian Economy Notes
Maharatnas is a category of Central Public Sector Enterprise (CPSE) which meets certain operational and financial eligibility such as average annual turnover, annual net worth and net profit after tax. It was introduced in 2009 with the motive to empower mega CPSEs to expand their operations and emerge as global giants or become Indian Multinational Companies (MNCs). Power Finance Corporation (PFC) was granted the status of Maharatna in October 2021. This article will throw light on the maharatna status of corporations in India, which is important for the UPSC examination.
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What are Maharatna Companies?
PSUs in India are also classified based on their non-financial goals and are registered under Section 8 of the Companies Act, 2013. (erstwhile Section 25 of Companies Act, 1956). The government established a higher Maharatna category in 2010.
Maharatna status is granted to companies that fulfil the following criteria:
- Such organizations should already have a Navratna status.
- They should be listed on the Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
- Their average annual turnover should be more than Rs. 25,000 crore especially for the last 3 years.
- Their average annual net worth should be more than Rs. 15,000 crore, during the last 3 years.
- Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
- Such organizations should have a significant global presence or international operations.
| Other Relevant Links | |
|---|---|
| Navratnas | Miniratnas |
| Disinvestment | Economic Crisis of 1991 |
| Mixed Economy | LPG Reforms |
Significance of Granting a Company Maharatna Status
- Financial Independence: Rs. 1,000 crore – Rs. 5,000 crore, or the freedom to invest up to 15% of their net worth in a project.
- It will enhance operational and financial autonomy thus increasing power to make financial decisions.
- It will enable the PSUs to make equity investments and undertake various financial joint ventures (JV) and wholly-owned subsidiaries
- This development will lead to mergers and acquisitions (M&A) in India as well as abroad.
- The company boards could implement and modify schemes pertaining to personnel as well as human resource management and training.
- Companies could float fresh equity, transfer assets, divest shareholding in subsidiaries, however, would be subjected to the condition that the delegation will only be in respect of subsidiaries set up by the holding company.
- Acquiring the maharatna status will help in implementing various ambitious projects of the government such as providing funds for infrastructure, etc.
Maharatna Companies in India
The following companies are recognized as maharatnas:
- Bharat Heavy Electricals Limited (BHEL)
- Bharat Petroleum Corporation Limited (BPCL)
- Coal India Limited (CIL)
- Gas Authority of India Limited (GAIL)
- Hindustan Petroleum Corporation Limited (HPCL)
- Indian Oil Corporation Limited (IOCL)
- National Thermal Power Corporation Limited (NTPC)
- Oil & Natural Gas Corporation Limited (ONGC)
- Power Grid Corporation of India Limited
- Steel Authority of India Limited (SAIL)
- Power Finance Corporation Limited (PFC)
Conclusion
Maharatna status was introduced in India so as to take some of the Indian PSUs on a global map. It resulted in the emergence of PSUs with an increase in competitiveness and profitability. Increased financial autonomy and a flexible operational approach enabled them to raise capital as well.
| Other Relevant Links | |
|---|---|
| Indian Economy Notes | Economic Reforms 1991 |
| New Economic Policy (Nep) -1991 | Liberalisation |
| Privatisation | Globalisation |
FAQs
Question: What are Maharatnas in the context of Indian public sector enterprises?
Answer: Maharatnas are a category of state-owned enterprises in India that have been granted enhanced financial autonomy and operational freedom by the Government of India. This status is bestowed on companies that have a significant market capitalization, substantial revenues, and a strong track record of performance. The Maharatna status allows these companies to make investment decisions up to a certain limit without prior government approval, facilitating quicker decision-making and fostering competitiveness in the market.
Question: What criteria must a public sector enterprise meet to attain Maharatna status?
Answer: To be eligible for Maharatna status, a public sector enterprise must meet the following criteria:
- It should be a listed company on the stock exchange in India.
- It must have a minimum net worth of ₹15,000 crores.
- It should have an average annual turnover of at least ₹25,000 crores during the last three years.
- The company should have a significant market capitalization, which is typically defined as ₹50,000 crores or more.
Question: What are the benefits of Maharatna status for public sector enterprises?
Answer: The Maharatna status offers several benefits, including:
- Increased Autonomy: Maharatnas enjoy greater financial and operational autonomy, allowing them to make significant investment decisions without prior government approval.
- Enhanced Competitive Edge: The status empowers these enterprises to compete more effectively in the global market by enabling quicker decision-making.
- Greater Access to Capital: Maharatnas can raise funds through market instruments with fewer regulatory constraints, facilitating growth and expansion.
- Focus on Strategic Sectors: The status encourages these companies to invest in critical sectors such as infrastructure, energy, and technology, contributing to national development.
Question: Can you name some of the Maharatna companies in India?
Answer: Some of the prominent Maharatna companies in India include:
- Oil and Natural Gas Corporation (ONGC)
- Indian Oil Corporation (IOC)
- Bharat Heavy Electricals Limited (BHEL)
- Steel Authority of India Limited (SAIL)
- Coal India Limited (CIL)
Question: How do Maharatnas contribute to the Indian economy?
Answer: Maharatna companies significantly contribute to the Indian economy in various ways:
- Employment Generation: They provide direct and indirect employment to millions of people, enhancing livelihood opportunities.
- Infrastructure Development: Maharatnas play a crucial role in developing infrastructure, including energy, transportation, and industrial projects, which are essential for economic growth.
- Revenue Generation: These enterprises contribute substantially to government revenues through taxes and dividends.
- Technological Advancements: Maharatnas invest in research and development, fostering innovation and technological progress in the country.
MCQs
1. What is the minimum net worth required for a public sector enterprise to qualify as a Maharatna?
A) ₹5,000 crores
B) ₹10,000 crores
C) ₹15,000 crores
D) ₹20,000 crores
Answer: (C) See the Explanation
Explanation: A public sector enterprise must have a minimum net worth of ₹15,000 crores to qualify for Maharatna status.
2. Which of the following is a Maharatna company?
A) Hindustan Aeronautics Limited (HAL)
B) Bharat Electronics Limited (BEL)
C) Indian Oil Corporation (IOC)
D) National Thermal Power Corporation (NTPC)
Answer: (C) See the Explanation
Explanation: Indian Oil Corporation (IOC) is one of the Maharatna companies recognized for its significant contributions to the oil and gas sector.
3. How many Maharatna companies are there currently in India?
A) 8
B) 10
C) 12
D) 15
Answer: (A) See the Explanation
Explanation: As of now, there are 8 Maharatna companies in India that have been granted this status by the Government of India.
4. What is one of the primary benefits of Maharatna status?
A) Mandatory government oversight
B) Limited operational freedom
C) Enhanced financial autonomy
D) Restricted investment capabilities
Answer: (C) See the Explanation
Explanation: One of the primary benefits of Maharatna status is enhanced financial autonomy, allowing companies to make substantial investments without prior government approval.
5. Which of the following criteria is NOT required for Maharatna status?
A) Average annual turnover of ₹25,000 crores
B) Market capitalization of ₹50,000 crores
C) Minimum net worth of ₹15,000 crores
D) Membership in the Confederation of Indian Industry
Answer: (D) See the Explanation
Explanation: Membership in the Confederation of Indian Industry is not a criterion for Maharatna status; the focus is on financial metrics such as turnover and net worth.
GS Mains Questions and Model Answers
Q1: Evaluate the role of Maharatna companies in the Indian economy.
Answer: Maharatna companies play a pivotal role in the Indian economy by driving growth in various sectors, including energy, infrastructure, and manufacturing. Their significant investments contribute to national development, creating jobs and promoting economic stability. As leaders in their respective industries, these companies also set benchmarks for operational efficiency and innovation. Moreover, Maharatna status allows them to make strategic investments independently, fostering rapid growth and enhancing competitiveness in the global market. Thus, the role of Maharatna companies is critical for India's economic advancement and achieving self-sufficiency.
Q2: Discuss the criteria for Maharatna status and its implications for public sector enterprises.
Answer: The criteria for Maharatna status include being a listed company, having a minimum net worth of ₹15,000 crores, an average annual turnover of ₹25,000 crores over the last three years, and a market capitalization of ₹50,000 crores. Achieving this status implies enhanced operational freedom and financial autonomy, allowing these enterprises to make substantial investments and strategic decisions without prior government approval. This increased autonomy fosters innovation and responsiveness to market demands, which is crucial for public sector enterprises to remain competitive in an evolving economic landscape.
Q3: Analyze the challenges faced by Maharatna companies in achieving their objectives.
Answer: Maharatna companies face several challenges that hinder their ability to achieve their objectives, including bureaucratic hurdles, competition from private sectors, and fluctuating market conditions. While they enjoy autonomy, they must navigate complex regulatory environments that can impede swift decision-making. Additionally, Maharatnas often compete with private enterprises that have more agility and fewer constraints, posing challenges in market share retention and profitability. Furthermore, global economic fluctuations, changes in policy, and environmental regulations can impact their operational strategies. Addressing these challenges requires strategic planning, investment in technology, and adaptation to market dynamics to sustain growth and innovation.
Previous Year Questions on Maharatnas
1. UPSC CSE Prelims 2021:
Question: Which of the following is NOT a Maharatna company?
A) Coal India Limited
B) Indian Oil Corporation
C) Hindustan Aeronautics Limited
D) Bharat Heavy Electricals Limited
Answer: (C)
Explanation: Hindustan Aeronautics Limited (HAL) is not categorized as a Maharatna company; it is recognized as a Navratna company.
2. UPSC CSE Mains 2019 (GS Paper 1):
Question: "Examine the impact of Maharatna status on public sector enterprises in India." Discuss the challenges and benefits.
Answer: Maharatna status significantly enhances the operational efficiency and competitiveness of public sector enterprises by providing greater autonomy and financial flexibility. This status allows companies to make large investments and strategic decisions independently, promoting innovation and responsiveness to market needs. However, challenges such as bureaucratic constraints, competition from the private sector, and regulatory hurdles persist. Balancing autonomy with accountability remains crucial for Maharatnas to effectively contribute to the Indian economy while navigating these challenges.
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