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Centre to Revamp CPSE Guidelines
Classification Aimed at Enhancing Quality and Efficiency
Context: In a significant policy shift aimed at enhancing efficiency and accountability, the Indian government is preparing to revise the guidelines for classification and performance assessment of Central Public Sector Enterprises (CPSEs).
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- A senior government official confirmed that the new framework may introduce provisions to downgrade CPSEs based on underperformance, a move that would mark a first in India’s public sector governance model.
Current Classification
- Currently, CPSEs are classified into four major categories — Maharatna, Navratna, Mini Ratna Category I, and Mini Ratna Category II — based on various financial and operational parameters.
- The proposed changes will focus on strengthening performance-driven governance, incentivizing efficiency, and ensuring higher accountability among public sector undertakings.
Revised Classification
- According to the official, “The revised CPSE framework is being designed to improve quality, governance, and financial discipline.
- It is likely to include a provision to downgrade CPSE status if performance deteriorates, unlike the current system which only allows for elevation based on merit.”
- This initiative comes on the back of a record-breaking dividend payout from CPSEs.
- In FY 2024-25, CPSEs paid a historic ₹74,016 crore to the central government. Leading contributors included:
- Coal India Ltd – ₹10,252 crore
- ONGC – ₹10,001 crore
- Indian Oil Corporation – ₹5,090 crore
- Power Grid Corporation of India – ₹4,824 crore
- NTPC Ltd – ₹4,088 crore
- This represents a consistent upward trend over the years, with dividend receipts of ₹63,749 crore in FY24, ₹59,533 crore in FY23, ₹59,294 crore in FY22, and ₹39,750 crore in FY21.
CPSE Status Upgrades on the Rise
- In recent years, the government has also upgraded several enterprises to higher classifications.
- In 2024, Union Finance Minister Nirmala Sitharaman approved the elevation of:
- RailTel Corporation of India
- Solar Energy Corporation of India (SECI)
- Satluj Jal Vidyut Nigam (SJVN)
- National Hydroelectric Power Corporation (NHPC)
- All of these CPSEs were granted Navratna status, reflecting their strong financial performance.
- Additionally, IRCTC and Indian Railway Finance Corporation (IRFC) were upgraded from Miniratna to Navratna status last month.
What It Takes to Be a Maharatna or Navratna CPSE
- To attain Maharatna status, a CPSE must:
- Be listed on a recognised Indian stock exchange
- Have a minimum public shareholding of 25% (per SEBI norms)
- Report an average annual turnover of over ₹25,000 crore
- Maintain a net worth above ₹15,000 crore
- Earn an average net profit after tax of ₹5,000 crore over the last three years
- Demonstrate a strong global presence or significant international operations
- The Maharatna scheme, launched in 2010, aims to empower India’s top-performing CPSEs to compete globally by granting them greater financial autonomy and strategic freedom.
- On the other hand, the Navratna scheme, introduced in 1997, recognises CPSEs that:
- Score an “Excellent” or “Very Good” MoU rating in at least three of the last five years
- Secure a composite score of 60 or above across six financial metrics such as profitability ratios, earnings per share, and operational efficiency
