Context: Recently, Power sector-focussed non-banking finance company (NBFC) REC Ltd. has been accorded the status of a ‘Maharatna’ Central Public Sector Enterprise, thus providing it with greater operational and financial autonomy.

• The granting of ‘Maharatna’ status will impart enhanced powers to the company’s board while taking financial decisions. REC Ltd. is the 12th company to be given the Maharatna Status.

Key Facts

• The Maharatna status provides the state-run company’s board more power while making financial decisions.

• The board of a Maharatna Central Public Sector Enterprise can make equity investments to be involved in financial joint ventures and wholly-owned subsidiaries and undertake mergers and acquisitions in India and abroad.

• This power is limited to a ceiling of 15 per cent of the net worth of CPSE concerned, limited to Rs.5,000 crore in one project.

• The board can also structure and implement schemes related to personnel and human resource management and training.

• The Maharatna status enables the REC to be involved in technology joint ventures and other strategic alliances.

• This comes at a time when the Central Government is planning to give REC the status of development finance institution to enable it to boost global climate funding and net zero investment in India.

Maharatna Status

• The Maharatna dispensation was ushered in by the Union government for mega Central Public Sector Enterprises (CPSEs) to become global giants (introduced in 2010).

• CPSEs are those companies in which the direct holding of the Central Government or other CPSEs is 51% or more.

• “Maharatna” status is granted to a company which has recorded more than Rs. 5,000 crores of net profit for three consecutive years, an average annual turnover of Rs. 25,000 crore for three years or should have an average annual net worth of Rs. 15,000 crore for three years. It should also have global operations or footprints.

• A CPSE should also have a Navratna status, be listed on an Indian stock exchange.