Navratna status

Indian Economy glossary

Also called: Navratna · Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT

Meaning

Navratna status is a special grade given to a large, profitable central public sector enterprise (CPSE), meaning a company where the Centre and/or other CPSEs hold at least 51% of the shares. To get it, the firm must already be a Miniratna Category I and a Schedule A CPSE. It must also have an "excellent" or "very good" MoU rating in 3 of the last 5 years and a composite score of at least 60 on six performance parameters. In return, its board can invest up to Rs 1,000 crore or 15% of its net worth, whichever is lower, in one project without asking the government.

Board investment cap per project = lower of (Rs 1,000 cr, 15% × net worth)

Why it matters: it lets a strong state company take quick decisions and compete with private and foreign firms, while the government still owns it. It sits in the middle of the Ratna ladder (Miniratna → Navratna → Maharatna), which is a common Prelims question.

Explanation

How it works: the autonomy route

  • The problem after 1991
  • The New Industrial Policy 1991 cut the list of sectors kept only for the public sector.
  • CPSEs now had to compete with private and foreign firms.

  • A company that needs ministry approval for every big decision is too slow to compete.

  • The fix: reward good performance with freedom

  • A CPSE earns more freedom by making more profit.
  • With more freedom, it takes faster decisions.

  • Faster decisions help it compete with private and global firms.

  • Navratna status gives the company's board more financial, managerial and operational autonomy. It can invest, form joint ventures (JVs, meaning new businesses set up with a partner firm) and compete globally without going to the ministry each time.

  • The history of this system
  • Arjun Sengupta Committee (1984) studied how to make public enterprises more accountable.
  • This led to the MoU system (1988). An MoU (Memorandum of Understanding) is a yearly performance agreement between a CPSE and its ministry. Targets are fixed at the start of the year. At the end, the CPSE is rated from "excellent" to "poor".
  • Navratna and Miniratna status came in 1997.
  • Maharatna status was added above it in 2009-10.

Eligibility: the four gates

A CPSE must pass all four:

  1. It must already be a Miniratna Category I. That means a profit in each of the last 3 years, a pre-tax profit of at least Rs 30 cr in at least one of those years, and a positive net worth.
  2. It must be a Schedule A CPSE. Schedule A is the top pay-scale grade of CPSEs (Schedules A to D). The Department of Public Enterprises (DPE) fixes it based on the company's size and importance.
  3. It must have an "excellent" or "very good" MoU rating in 3 of the last 5 years.
  4. It must have a composite score of 60 or more on six performance parameters.
  • Net worth means what the owners own after all debts are paid: paid-up capital plus reserves.
  • Note the difference in the tests. Miniratna depends mainly on profit. Navratna also needs a size grade (Schedule A) and a track record (MoU ratings and score).

The Ratna ladder: where Navratna sits

Status Key test Board's investment power (per project)
Miniratna Category II Profit in each of the last 3 years; positive net worth [1] Up to Rs 300 cr
Miniratna Category I As above, plus pre-tax profit of at least Rs 30 cr in at least one year Up to Rs 500 cr
Navratna Miniratna-I + Schedule A + MoU record + score ≥ 60 Up to Rs 1,000 cr or 15% of net worth
Maharatna Must already be a Navratna; listed; large size; global presence [1] Up to Rs 5,000 cr or 15% of net worth
  • Losing or moving up
  • The status depends on performance. A Navratna that stays big, listed and global can rise to Maharatna.
  • Weak performance works against keeping the status, because the tests look at recent years of profit and MoU ratings.

Worked example: "Rs 1,000 cr or 15% of net worth, whichever is lower"

  • Case 1: smaller Navratna
  • Net worth = Rs 5,000 cr. 15% of this = Rs 750 cr.
  • Rs 750 cr is below Rs 1,000 cr.

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

  • Case 2: larger Navratna

  • Net worth = Rs 8,000 cr. 15% of this = Rs 1,200 cr.
  • Rs 1,200 cr is above Rs 1,000 cr.

  • So the cap is Rs 1,000 cr.

  • Lesson: the Rs 1,000 cr figure is a ceiling, not a promise. A smaller Navratna gets less power.

In India

  • Who manages it: the Department of Public Enterprises (DPE) runs the Ratna system and the Schedule A–D grading. Its yearly DPE Public Enterprises Survey counts about 250-270 operating CPSEs. Check the latest Survey for the current number.
  • Rules behind it: DPE eligibility criteria, as stated by PIB, set the Ratna tests: continuous profit for 3 years and positive net worth for Miniratna, and prior Navratna status for Maharatna [1].
  • Numbers
  • An older PIB release counted 7 Maharatna, 16 Navratna and 71 Miniratna CPSEs [1]. The lists have grown since then, so check DPE for current figures.

  • There are now about 14 Maharatnas, and each one had to be a Navratna first. Examples include IOCL, SAIL, NTPC, ONGC, Coal India, BHEL, GAIL and PFC.

  • NCERT is outdated here

  • Class 11 NCERT (LPG: An Appraisal, Box 3.1) lists HAL as a Navratna. HAL became a Maharatna in October 2024.

  • NCERT's MTNL Navratna example is also dated.

  • Policy link: under the New Public Sector Enterprise Policy 2021, the state keeps only a bare-minimum presence of CPSEs in strategic sectors [2]. Profitable Navratnas in these sectors are the kind of firms the state keeps and gives more freedom to.

Don't confuse with

  • Maharatna: the grade above Navratna. It needs Navratna status first, stock exchange listing with SEBI minimum public shareholding, global presence and 3-year averages of turnover > Rs 25,000 cr, net worth > Rs 15,000 cr and net profit after tax > Rs 5,000 cr [1]. Its cap is Rs 5,000 cr (or 15% of net worth). Navratna has no listing or global-presence test.
  • Miniratna Category I: the grade below. It is a gate into Navratna, not the same thing. It needs only profit and positive net worth, has no Schedule A or MoU-score test, and gives a flat Rs 500 cr cap with no "15% of net worth" clause.
  • Disinvestment / strategic sale: Navratna status gives more autonomy while the state keeps ownership. Disinvestment reduces the state's ownership by selling shares. A strategic sale (stake + management control, e.g. Air India to the Tatas in January 2022) ends state control altogether.
  • Schedule A: a pay-scale and size grade fixed by DPE, not a Ratna status. It is only one of the conditions for becoming a Navratna.

Prelims Hooks

  • Order of events: Arjun Sengupta Committee 1984 → MoU system 1988 → Navratna and Miniratna 1997 → Maharatna 2009-10.
  • Navratna criteria: Miniratna Category I + Schedule A + "excellent/very good" MoU rating in 3 of the last 5 years + composite score ≥ 60 on six parameters.
  • Navratna board cap per project: Rs 1,000 cr or 15% of net worth, whichever is lower. Compare: Maharatna Rs 5,000 cr, Miniratna-I Rs 500 cr, Miniratna-II Rs 300 cr.
  • Trap: listing on a stock exchange and global presence are Maharatna tests, not Navratna tests [1].
  • Trap: HAL is shown in NCERT as a Navratna but became a Maharatna in October 2024.
  • Ratna status applies only to CPSEs (Centre and/or other CPSEs hold ≥ 51%). A company mainly owned by a state government is a state PSE, and cannot be a Navratna.

Mains Points

  • Autonomy vs ownership exit (GS-III)
  • The Ratna system and MoU improve CPSEs while the state keeps ownership. The New PSE Policy 2021 instead shrinks the state's footprint [2].
  • A balanced answer supports both: keep and empower strategic, profitable CPSEs (Navratnas and Maharatnas), and exit non-strategic, loss-making ones.

  • Class 11 NCERT notes that Ratna status improved CPSE performance. The government now prefers to keep profitable PSEs and let them grow globally and raise money from markets.

  • Autonomy on paper vs in practice (GS-II governance)

  • Navratna powers mean little if the ministry still controls board appointments and key decisions.

  • Real autonomy needs professional boards, independent directors and less ministry interference. Otherwise the status stays on paper.

  • Performance-linked freedom as an incentive design

  • Freedom grows step by step with results: profit → Miniratna → MoU record → Navratna → Maharatna.
  • This pushes CPSE managers to meet MoU targets. But it depends on MoU targets being honest and hard to reach, not soft targets that are easy to beat.

Related concepts

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Sources

  1. 1Eligibility Criteria for Grant of Maharatna, Navratna and Miniratna Status to CPSEs (PIB)pib.gov.in · tier 1
  2. 2Policy of Strategic Disinvestment announced; Clear Roadmap for Strategic and Non-Strategic Sectors (PIB)pib.gov.in · tier 1