Government Reviews Maharatna Status of BHEL and SAIL

The Indian government has placed Bharat Heavy Electricals Ltd (BHEL) and Steel Authority of India Ltd (SAIL) under a one-year review to assess their Maharatna status, as per The Economic Times report.  

This decision follows a review that found both companies falling short of the profitability criterion, despite meeting other financial norms. 

Profitability Concerns for Maharatna Status 

BHEL and SAIL are currently the only companies among India's 14 Maharatna public sector undertakings (PSUs) that do not meet the requirement of maintaining an average annual profit after tax (PAT) of more than ₹5,000 crore over the last 3 years.  

While they have achieved the necessary turnover and net worth standards, their profitability remains a concern. 

Should their financial performance not improve during the review period, these companies risk being downgraded to Navratna status.  

This would reduce their financial autonomy, limiting their ability to make equity investments without prior government approval. 

Review Process and Recommendations 

The review was conducted by a committee led by Cabinet Secretary TV Somanathan. The panel recommended stricter financial and governance standards for Central Public Sector Enterprises (CPSEs), including provisions for withdrawing Ratna status from companies that fail to meet the prescribed criteria. 

The ministries overseeing BHEL and SAIL have been tasked with submitting turnaround plans aimed at improving profitability and overall financial performance. 

Eligibility Criteria Under Scrutiny 

The review has also prompted a broader examination of the Maharatna eligibility framework. Representatives from NITI Aayog highlighted that the turnover, net worth, and profitability thresholds were established in 2010 and have not been updated to reflect current market conditions. 

The committee has requested the Department of Public Enterprises (DPE) to revisit these criteria by indexing them to 2025 prices, after which all CPSEs may be reassessed under the revised framework. 

Read More: BHEL Share Price in Focus; Wins ₹2,000-2,500 Crore Order from Dangote Petroleum Refinery, Nigeria! 

Company-Specific Challenges 

During the review, the Steel Ministry informed the committee that SAIL's average annual turnover exceeded ₹1 trillion over the last 4 years, with an average net worth of ₹53,976 crore. However, the company last met the PAT threshold in 2022-23. 

In BHEL's case, NITI Aayog identified human resource policies as a significant constraint on growth, recommending a comprehensive review. The Ministry of Heavy Industries has indicated that a plan is in place to enhance the company's financial performance. 

Conclusion 

The Centre's decision to review the Maharatna status of BHEL and SAIL underscores the importance of profitability in maintaining this classification. As the government revisits the eligibility criteria, both companies face the challenge of improving their financial performance to retain their status. 

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