Maharatna, Navratna and Miniratna status

Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Class 11, Ch 3 "Liberalisation, Privatisation and Globalisation: An Appraisal"

Meaning

Maharatna, Navratna and Miniratna are three levels of status that the Government of India gives to profitable central public sector enterprises (CPSEs). A CPSE is a government company in which the Centre, other CPSEs, or both together hold at least 51% of the shares. Each status gives the company's board more financial, managerial and operational autonomy (freedom to decide on its own). With this freedom the board can invest, form joint ventures and compete in India and abroad without asking its ministry every time.

It matters because the New Industrial Policy 1991 made CPSEs compete with private and foreign firms. The Ratna system is the state's way to make strong CPSEs perform better while the state keeps ownership. The other way was to sell weak or non-core CPSEs.

Explanation

How the system works: a ladder of freedom

• The basic idea
• A CPSE that earns more profit gets a higher status.
• A higher status gives the board more freedom and bigger spending limits.

• With more freedom the company decides faster, so it can compete with private and global firms.

• Where it came from

• Arjun Sengupta Committee (1984): it studied how to make public sector enterprises (PSEs) more accountable.
• MoU system (1988): an MoU (Memorandum of Understanding) is a yearly performance agreement between a CPSE and its ministry. Targets are set at the start of the year. At the end, the CPSE is rated from "excellent" to "poor".

• Navratna and Miniratna (1997), then Maharatna (2009-10).

• Good MoU ratings are part of the test for Navratna. So the two systems are linked: good performance on the MoU helps a CPSE climb the Ratna ladder.

The four levels and what each needs

Status	Key criteria	Board's investment power (per project)
Maharatna	Already a Navratna; listed with SEBI's minimum public shareholding; 3-year average turnover > Rs 25,000 cr, net worth > Rs 15,000 cr, net profit after tax > Rs 5,000 cr; significant global presence	Up to Rs 5,000 cr or 15% of net worth
Navratna	Miniratna Category I and Schedule A; "excellent/very good" MoU rating in 3 of the last 5 years; composite score ≥ 60 on six performance parameters	Up to Rs 1,000 cr or 15% of net worth
Miniratna Category I	Profit in each of the last 3 years; pre-tax profit ≥ Rs 30 cr in at least one of them; positive net worth	Up to Rs 500 cr
Miniratna Category II	Profit in each of the last 3 years; positive net worth	Up to Rs 300 cr

• Key terms
• Net worth: what the owners own after all debts are paid, that is, paid-up capital plus reserves.
• Schedule A: the top pay-scale grade of CPSEs. DPE (Department of Public Enterprises) grades CPSEs from Schedule A to D by size and importance.
• Listed: the company's shares trade on a stock exchange.

• Net profit after tax (PAT): profit left after all costs and taxes are paid.

• PIB confirms the Maharatna tests: listing with SEBI's minimum public shareholding, the three 3-year averages, significant global presence, and Navratna status first [2].

• PIB also confirms the Miniratna gate: continuous profit for 3 years and positive net worth [2].

Worked example: the "Rs X cr or 15% of net worth" rule

Read this rule as "whichever is lower".

• Navratna with net worth of Rs 5,000 cr
• 15% of Rs 5,000 cr = Rs 750 cr.
• Rs 750 cr is below Rs 1,000 cr.

• So the board can approve up to Rs 750 cr per project.

• Maharatna with net worth of Rs 40,000 cr

• 15% of Rs 40,000 cr = Rs 6,000 cr.
• Rs 6,000 cr is above Rs 5,000 cr.

• So the cap is Rs 5,000 cr per project.

• Lesson: a small Navratna or Maharatna may not get the full rupee limit. The 15% test can bring the limit down.

What makes a CPSE gain or lose status

• It moves up when it makes profit every year, its net worth grows, it gets good MoU ratings, and (for Maharatna) it gets listed and grows abroad.
• It stays stuck or falls behind when it makes losses, its net worth turns negative, or its MoU ratings are poor. A loss in any one of the last 3 years breaks the Miniratna condition.

In India

• Who manages it: the Department of Public Enterprises (DPE) sets the criteria and keeps the current lists. It also publishes the yearly Public Enterprises Survey, which counts about 250-270 operating CPSEs.
• How the numbers have grown
• An older PIB release counted 7 Maharatna, 16 Navratna and 71 Miniratna CPSEs [2].

• Today there are about 14 Maharatnas (check the latest DPE list). They include IOCL, SAIL, NTPC, ONGC, Coal India, BHEL, GAIL and PFC.

• Latest change: HAL (Hindustan Aeronautics Limited) became a Maharatna in October 2024.

• NCERT is outdated here
• NCERT (Class 11, Liberalisation, Privatisation and Globalisation: An Appraisal, Box 3.1) still lists HAL as a Navratna.

• Its MTNL Navratna example is also dated.

• Link with today's policy: under the New Public Sector Enterprise Policy 2021, the state keeps only a bare-minimum presence of CPSEs in strategic sectors. The rest are privatised, merged, made subsidiaries of other CPSEs, or closed [3]. Profitable Ratna companies in strategic sectors are the most likely to stay with the state.

Don't confuse with

• Disinvestment / privatisation: the Ratna system gives a CPSE more freedom while the state keeps ownership. Disinvestment sells the government's shares. Privatisation gives up ownership or management.
• MoU system (1988): an MoU is a yearly performance agreement and rating. Ratna status is a lasting grade of autonomy. MoU ratings are one input for Navratna status.
• CPSE vs SPSE: Ratna status is for CPSEs, where the Centre and/or other CPSEs hold ≥ 51%. A company mainly owned by a state government is a state PSE (SPSE), not a CPSE.
• Miniratna Category I vs Category II: both need 3 years of continuous profit and positive net worth. Only Category I also needs pre-tax profit of ≥ Rs 30 cr in at least one of those years. Its cap is Rs 500 cr, against Rs 300 cr for Category II.

Prelims Hooks

• Order of events: Arjun Sengupta Committee 1984 → MoU 1988 → Navratna and Miniratna 1997 → Maharatna 2009-10.
• A Maharatna must already be a Navratna, be listed with SEBI's minimum public shareholding, and have a significant global presence. Its 3-year averages must be turnover > Rs 25,000 cr, net worth > Rs 15,000 cr and PAT > Rs 5,000 cr [2].
• A Navratna must be Miniratna Category I + Schedule A, have "excellent/very good" MoU ratings in 3 of the last 5 years, and score ≥ 60 on six performance parameters.
• Board investment caps per project: Maharatna Rs 5,000 cr, Navratna Rs 1,000 cr (for both, or 15% of net worth, whichever is lower), Miniratna-I Rs 500 cr, Miniratna-II Rs 300 cr.
• Trap: HAL became a Maharatna in October 2024. NCERT still shows it as a Navratna.
• Trap: Ratna status means more autonomy with state ownership kept. It is not a form of disinvestment.

Mains Points

• Autonomy vs ownership exit
• The Ratna system and the MoU make CPSEs perform better while the state keeps ownership.
• The New PSE Policy 2021 instead shrinks the state's footprint [3].

• A balanced answer argues for both: keep and empower profitable, strategic CPSEs (the Ratnas), and exit loss-making, non-strategic ones.

• Evidence and limits

• NCERT notes that Ratna status improved the performance of CPSEs. The government now prefers to keep profitable PSEs and let them grow globally and raise money from markets.

• Weigh this against the Economic Survey 2019-20 finding that privatised CPSEs improved net worth, net profit and productivity after strategic disinvestment [4]. Ownership exit can also raise efficiency.

• Governance link (GS-II)

• Real autonomy needs a professional board, independent directors and less ministry interference.
• Without these, Ratna status stays only on paper. The ministry still controls decisions, and the company cannot move at market speed.

Related concepts

• Central public sector enterprise
• Maharatna status
• Navratna status
• Miniratna status
• Disinvestment
• Minority stake sale
• Strategic sale
• Strategic sector (public enterprise policy)
• Golden share

Read more

• Public enterprises after 1991: CPSEs, the Ratna system, disinvestment and privatisation