BHEL and SAIL: Two of the country's major 'Maharatna' companies—Bharat Heavy Electricals Limited (BHEL) and Steel Authority of India Limited (SAIL)—are currently facing a crisis. They have been served a stern one-year notice.
BHEL and SAIL Maharatna Tag: The 'Maharatna' status of two major state-owned companies, BHEL and SAIL, is in jeopardy. The central government has issued a one-year notice to both companies due to their poor performance.
Where are they falling short?
A review meeting chaired by Cabinet Secretary Dr. T.V. Somanathan revealed that both companies are failing to meet the most critical financial criterion for 'Maharatna' status.
To retain 'Maharatna' status, a company must have an average annual Profit After Tax (PAT) exceeding ₹5,000 crore over the preceding three years. In contrast, among the country's 14 'Maharatna' companies, BHEL and SAIL are the only ones failing to achieve this three-year profit target.
What happens if the 'Maharatna' status is revoked?
If these companies fail to improve their profitability within a year, they will be downgraded to the 'Navratna' category. This would curtail the financial autonomy of their boards.
Currently, as 'Maharatna' entities, both companies can make investment or business-related decisions involving up to ₹5,000 crore without government approval. Upon being downgraded to 'Navratna', their investment limit would be slashed to just ₹1,000 crore, which would impact their major projects.
What is the government's stance?
This marks the first instance where a government PSU has received such a stern warning regarding the potential revocation of its 'Maharatna' status. The Ministry of Heavy Industries and the Ministry of Steel have been asked to submit a detailed revival plan to improve the performance of these two companies. In this context, the government has also tightened corporate governance norms; these companies will now face penalties—such as a reduction in their performance scores—for lapses regarding CSR funds and the timely payment of MSME vendors.
