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1-min read

Government plans to relax Navratna norms for PSUs

This is aimed at enhancing the valuation of the firms and help the government obtain better price at the time of any stake sale.

Press Trust Of India

Updated:September 24, 2012, 5:43 PM IST
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Government plans to relax Navratna norms for PSUs
This is aimed at enhancing the valuation of the firms and help the government obtain better price at the time of any stake sale.

New Delhi: The government is working on a proposal to relax guidelines for granting the coveted Navratna status to public sector undertakings (PSUs). This is aimed at enhancing the valuation of such companies and help the government obtain better price at the time of any stake sale.

"The Department of Public Enterprises (DPE) has formed a panel to relook into the current parameters which a PSU needs to fulfill to be considered for grant of the Navratna status," an official said.

The committee has already met several times and is soon likely to finalise the guidelines, he said, adding, relaxation of norms is desirable to enable more PSUs to obtain the tag.

"The Department of Disinvestment (DoD) has made a case that one of the parameters to qualify for Navratna status is earning per share (EPS) and this needs to be modified as it is a disincentive for PSUs," the official said.

The department is also of the same view as the DoD on EPS. "To avoid any conflict, we are planning to bring in a substitute for EPS," the official said.

To qualify for the Navratna status, a CPSE having a Miniratna Category-1 status should have a composite score of 60 or above out of 100 marks based on its performance during the last three years on the six identified parameters.

These parameters include net profit to net worth (25 marks), earnings per share (10 marks), manpower cost to cost of production or services (15 marks) and gross profit out of turnover (15 marks).

On getting the Navratna status, the concerned CPSE board would not be required to take the government's permission for investments up to Rs 1,000 crore in a joint venture project or wholly-owned subsidiary.

Further, the official said, the move would also help the government to get a better price at the time of its stake sale in any CPSE.

In August, Finance Minister P Chidambaram had asked officials to expedite the process of disinvestment to enable state-owned companies hit stock markets in time and help government achieve the target of Rs 30,000 crore in 2012-13.

On September 14, the Cabinet Committee on Economic Affairs (CCEA) approved the minority stake sale in four PSUs - NALCO, MMTC, Hindustan Copper, NMDC - which is likely to fetch around Rs 15,000 crore to the exchequer.

Due to uncertain market conditions, the government during 2011-12 could raise only Rs 14,000 crore from disinvestment against the target of Rs 40,000 crore.

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