What makes PSU a Navratna?

Navratna is the most coveted status among public sector units (PSU). There are number of PSU’s and a total of 79 miniratnas and navratnas. Of these, as of Oct 21 2009, only 18 are classified as Navratna’s.

What is so good about the Navratna status?

A Navratna status makes a PSU a corporation in its strict form. It provides autonomy for decisions upto 1000 crores. Now, that’s a big deal. Might not be tantamount with the autonomy Mukesh Ambani, Anil Ambani or Ratan Tata have but an autonomy nevertheless.

There are 3 categories of PSU’s. A category-1 PSU, category-2 PSU and a Navratna.

What does a Navratna or a Miniratna status mean financially?

1. Miniratna category –1 Can make decisions up to 500 crores
2. Miniratna-category 2 – Can make decisions up to 250 crores
3. Navratna’s – Can make decisions up to 1000 crores

Navratna’s don’t need a government guarantee to carry out any activities. They do no depend on the budgetary support. Navratna can make a decision on projects or joint ventures which cost up to 15% of the net worth and limited to Rs. 1000 crores. The overall ceiling is 30% of the net worth of the company.

For a PSU to become a Navratna it has to be a Miniratna of Category 1. What makes a Miniratna (Category 1&2) :

Criteria for a PSU to become Minratna :

1. A profit making company for the last 3 consecutive years
2. Networth should be positive.
3. If a company fulfills 1 & 2 above, then it is a Category 2 Miniratna.
4. If a company fulfills 1 & 2 above and has a Pre-tax profit of 30 crores or more, then it is a Category 1 Miniratna.

How does a Miniratna Category 1 PSU become a Navratna?

1. Having Schedule ‘A’ and Miniratna Category-1 status.
2. Having at least three ‘Excellent’ or ‘Very Good’ Memorandum of Understanding (MoU) ratings during the last five years.
3. Having a composite score of 60 or above out of 100 marks based on its performance during the last three years on the following six identified efficiency parameters(performance indicators):

Performance Parameters	Maximum marks
Net Profit/Net Worth	25
Manpower cost / cost of production or services	15
Gross margin as capital employed	15
Gross profit as Turnover	15
Earnings per Share	10
Inter-Sectoral comparison based on Net profit to net worth	20
Total	100

The calculations for the above parameters can be found here.

Each Performance indicator above has a range and have marks associated with it. Based on the parameters and the scores the final score is arrived.

When the final score is above 60, it is placed before the Apex Committee for recommendation.

Here is the list of 18 Navartnas in India :

1. Bharat Electronics Limited
2. Bharat Heavy Electricals Limited
3. Bharat Petroleum Corporation Limited
4. Coal India Limited
5. GAIL (India) Limited
6. Hindustan Aeronautics Limited
7. Hindustan Petroleum Corporation Limited
8. Indian Oil Corporation Limited
9. Mahanagar Telephone Nigam Limited
10. National Aluminium Company Limited
11. NMDC Limited
12. NTPC Limited
13. Oil & Natural Gas Corporation Limited
14. Power Finance Corporation Limited
15. Power Grid Corporation of India Limited
16. Rural Electrification Corporation Limited
17. Shipping Corporation of India Limited
18. Steel Authority of India Limited

Of the 18 Navratna’s Coal India Limited and Hindustan Aeronautics Limited are not listed on the bourse. Coal India Limited is planning for an IPO.