Industry

Indian Economic System

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Indian Economy - Understanding the basics of Indian economic system

With reference to Navratna Public Sector Undertakings (PSUs), consider the following statements

They have been granted financial independence to invest up to Rs 1,000 crore without seeking approval from the Government.
They have the autonomy to incur capital expenditure on the purchase of new items.
Their Board of Directors has the power to allow mergers and acquisitions in India and abroad without any Government approval.

How many of the above statements is/are correct?

Only One

Only Two

All Three

None

Only statements 1&2 are correct.

RITES Limited, a PSU under the Ministry of Railways involved in transport consultancy and the engineering sector, was recently granted Navratna status.

About Navratna Status

The government categorises all Public Sector Undertakings (PSUs) into three categories, namely Maharatna, Navratna, and Miniratna.

Criteria to grant Navratna status:

To get Navratna status, the PSU should be a Miniratna-I, Schedule 'A' company, should have obtained an 'excellent' or 'very good' MoU rating in three of the last five years, and must have a composite score of 60 in six performance indicators.
For a company to achieve Navratna status, it must report a net profit of more than Rs 5,000 crore for three consecutive years, and maintain an average annual turnover of Rs 25,000 crore for three years, or have an annual average net worth of over Rs 15,000 crore for three years.
Navratna companies can achieve ‘Maharatna’ status by meeting specific performance benchmarks and fulfilling certain eligibility criteria.

How does Navratna status benefit PSUs?

Navratna PSUs have a comparative advantage over other companies as they have been granted financial independence to invest up to Rs 1,000 crore without seeking approval from the Union government.
The board of the 'Navratna' companies has autonomy to incur capital expenditure on the purchase of new items or for replacement without any monetary ceiling and to enter into technology joint ventures or strategic alliances, among others.
The status gives the Board of Directors of these CPSEs the power to allow mergers and acquisitions in India and abroad. However, they need an approval from the Cabinet Committee on Economic Affairs (CCEA) to make investments abroad.
The Chief Executive of the PSE gets the power to approve business tours abroad of functional directors up to five days’ duration (other than study tours, seminars, etc) in emergencies, under intimation to the Secretary of the administrative ministry.

Hence option 2nd is correct.

By: Shubham Tiwari