Shift Away From Disinvestment: With An Eye On Dividend, Centre Looks At Measures To Support PSUs

In short, the higher the profit margins, the higher the dividend-paying enterprises. In 2024-25, the government received a record dividend of more than Rs 74,000 crore from the CPSEs. In the previous financial year, the figure was about Rs 64,000 crore.

The annual Public Enterprise Survey (PE Survey) for 2023-24, released by the Department of Public Enterprises (DPE) revealed that the net profit of the operating CPSEs increased from Rs 1.02 lakh crore in 2019-20 to Rs 3.22 lakh crore in 2023-24. However, in 2022-23, marked by the post-COVID period, the net profit declined to Rs 2.18 Lakh crore.

The study noted that out of 272 operating CPSEs, 212 reported a total net profit of Rs 3.43 lakh crore and 58 reported net loss aggregating to Rs 0.21 lakh crore.

The public sector Oil & Natural Gas Corporation Ltd. registered the highest net profit.

“The government is now moving away from disinvestment. The focus will be on strengthening the existing ones,” a top government official told The Secretariat.

Earlier, Niti Aayog in a report Strategy For New India @75 had underlined the need for the government to exit CPSEs that are not strategic in nature. “Inefficient CPSEs surviving on government support distort entire sectors as they operate without any real budget constraints,” it said.

From Control To Capital Flow

Record dividends coming in from CPSEs give the required financial runway to the government amid increasing geopolitical and geo-economic tensions.

Gopal Krishna Agarwal, Economist and BJP’s national spokesperson, told The Secretariat, “Dividend is also flowing to the government coffers to a very great extent. The public sector undertakings' performance across the board in the capital market is remarkably seen in their high valuation at the stock market”.
He pointed out that the public sector undertakings' capex is also matching what the government is spending on infrastructure to more than Rs 10 lakh crore annually.    

First introduced back in 1991, the disinvestment of PSUs has now seemingly been put on a back burner. Now the government wants to improve the PSUs to make these dividend-paying organisations.

Committee Set Up

A high-level working committee chaired by K Moses Chalai, Secretary, Department of Public Enterprises (DPE) is looking into the issue.

The committee has commenced an in-depth assessment of the current framework governing the autonomy of CPSEs, and the review will consider ways to offer them greater operational and financial freedom, particularly in areas such as capital expenditure, investments, and partnerships, which currently require multiple layers of approval.

The committee includes Secretaries from the ministries of Coal, Petroleum, Power and Steel, along with representatives from NITI Aayog, the Indian Institute of Corporate Affairs, and the Department of Investment and Public Asset Management (DIPAM). DPE Director serves as the Committee Secretary.

The panel is also expected to consult senior CPSE executives and domain experts before finalising its recommendations.

Once completed, the committee’s report will go to the Cabinet Secretary for examination. The Ministry of Finance will then make the final call on the proposed changes, including any revisions to the Ratna categories and new autonomy norms.

Goals Of The Committee

• Enhancing Autonomy- To broaden the financial and operational domain for quicker, market-driven decisions.
• Revising ‘Ratna’ Criteria- To revise the criteria for 'Ratna' scheme (Miniratna, Navratna, and Maharatna) statuses, and the wider “Schedule” classification that delineates the magnitude and authority of public enterprises.
• Objective Categorisation- To set uniform, measurable standards for fair recognition across all CPSE sectors.

What Is ‘Ratna’ Classification

The Ratna scheme is a three-tier system that recognises select CPSEs and grants them varying degrees of financial and operational autonomy based on their performance and scale. The government has been giving autonomy to most of the public sector undertakings, and its interference is kept to a minimum level in its operations and appointments, sources said.

Miniratna: This category recognises smaller but steadily profitable PSUs. Split into Category I and II, it rewards those who have stayed in the back for at least three years, granting them limited powers to invest and expand independently. Some of the famous companies holding the Miniratna status are BSNL, IRCTC, and AAI.

Navratna: CPSEs holding this status have greater financial and operational freedom to invest, expand, and collaborate globally. Miniratna-I companies can reach the upper echelon of Navratna by meeting stringent performance and evaluation criteria, thus acquiring more space for faster and wider business decisions. Among the few and the best who enjoy the Navratna title are HAL, MTNL, and PFC.

Maharatna: The Maharatna status is exclusively for the largest and most profitable CPSEs. It is granted to CPSEs that have a strong global presence and are financially healthy, provided they generate an annual revenue of over Rs 25,000 crore and a yearly profit of Rs 5,000 crore. BHEL, GAIL, and SAIL are some of the famous companies that have acquired the Maharatna status.

Impact On India’s Economy

The government’s effort to reform CPSEs can be seen as a straightforward change in the government’s approach from supervision to optimisation. The re-arrangement of the 'Ratna' paradigm, the enlarging of independence, and the simplification of the disinvestment process signal that the government expects state-owned enterprises to keep pace with India's extensive economic ambitions.

The focus is on making their management more efficient, ensuring that government capital is utilised by the nation for its developmental needs.