Rural Electrification Corporation got ‘Maharatna’ status

Why in news?

• Recently, Rural Electrification Corporation (REC) has been accorded the status of a ‘Maharatna’ Central Public Sector Enterprise (CPSE).

About REC:

• REC is a Non-Banking Financial Company (NBFC), incorporated in 1969, focusing on Power Sector Financing and Development across India.
• It comes under the purview of the Ministry of Power.
• It has been appointed as a Nodal Agency for Government of India’s flagship schemes as following:
  • Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGAYA)
  • Deen Dayal Upadhaya Gram Jyoti Yojana (DDUGJY)
  • National Electricity Fund (NEF)
• REC also assists the Ministry of Power in monitoring the Ujjwal Discom Assurance Yojana (UDAY).

Benefits to Maharatna Status to REC:

• The Board of a ‘Maharatna’ CPSE can make equity investments to undertake financial joint ventures and wholly-owned subsidiaries and undertake mergers and acquisitions in India and abroad, subject to a ceiling of 15% of the Net Worth of the concerned CPSE, limited to ?5,000 crores in one project.
• The Board can also structure and implement schemes relating to personnel and Human Resource Management and Training.
• REC now can also enter into technology Joint Ventures or other strategic alliances among others.

Classification of CPSEs:

• Miniratna, Navratna and Maharatna Status are given to PSUs depending on their success.
• Department of Public Enterprises under Ministry of Heavy Industries & Public Enterprises grants these status.
• Miniratna Companies
  • They are divided into 62 Miniratna Category-I (Airports Authority of India, Antrix Corporation, BSNL etc.) and 12 Miniratna Category-II companies ().
  • Eligibility Criteria:
    • Have made profits continuously for the last three years and should have a positive net worth.
    • Should not have defaulted in the repayment of loan due to Government
    • Shall not depend upon budgetary support
  • Benefits for Investment
    • Miniratna Category-I
      • Financial Autonomy up to Rs. 500 crore or equal to their net worth, whichever is lower.
    • Miniratna Category-II
      • Financial Autonomy of up to Rs. 300 crore or up to 50% of their net worth, whichever is lower.
• Navratna Status:
  • The Government had introduced Navratna scheme, in 1997, to identify CPSEs that had comparative advantages and to support them in their drive to become global giants.
  • The Boards of Navratna CPSEs have been delegated powers in the Capital expenditure, Investment in joint ventures / subsidiaries, Mergers & acquisition and Human resources management, etc.
  • At present there are 16 Navratna companies:
    • Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited, Power Grid Corporation of India Limited etc.
• Maharatna Status:
  • The “Maharatna” category for CPSEs was introduced in 2009 with objective to empower mega CPSEs to expand their operations and emerge as global giants or become Indian Multinational Companies (MNCs).
  • At present, there are nine Maharatna companies:
    • Coal India (CIL), GAIL (India), NTPC, Oil and Natural Gas Corporation (ONGC), Steel Authority of India (SAIL) etc.
  • Criteria for Maharatna status
    • Having Navratna status.
    • Average annual turnover of more than Rs. 25,000 crore, during last 3 years.
    • Average annual net worth of more than Rs. 15,000 crore, during last 3 years.
    • Average annual net profit after tax of more than Rs. 5,000 crore, during last 3 years.
    • Should have significant global presence and international operations.
    • Listed on Indian stock exchange with minimum prescribed public shareholding limit under SEBI regulations.

PRACTICE QUESTION

Consider the following statements:

1. To be qualified for Miniratna status, CPSEs should not be depend upon budgetary support

2. Ministry of Heavy Industries and Public Enterprises is empowered to grant Miniratna, Navratna and Maharatna status.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer