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An estimated 4-minute read

ONGC to lose 'Navratna' Status

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What is meant by Navratna Status?

Historically, an ornament composed of nine precious gems was referred as ‘Navratna’. This term was also used to refer nine extraordinary ministers/clerks in the court of ‘Akbar’. It is evident from the available statistics that whenever the term ‘Navratna’ has come into the picture, it has denoted the existence of nine valuable things under a common set. The same term i.e. ‘Navratna’ was used by the Indian Government in the year 1997 to describe its most prestigious Public Sector Undertakings. At that point of time, the number of PSEs (Public Sector Enterprises) over whom this status was conferred was nine. 'Navratna' status provided these PSEs a greater autonomy under in order to compete in the global market. Moreover, through this status it was assured that these PSEs would have the freedom to enter into the joint venture, form alliances etc. Initially, there were only nine companies under the category of ‘Navratna’, and this status was extended to other companies from time to time as soon as they were able to fulfil the criteria to become a ‘Navratna’ PSE. To be qualified as a Navratna, a company must be a ‘Miniratna’ with four independent directors. Moreover, it must obtain a score of 60 (out of 100). The score is based on six parameters which include net profit to net worth, total manpower cost to total cost of production or cost of services, PBDIT (Profit Before Depreciation, Interest and Taxes) to capital employed, PBDIT to turnover, EPS (Earning Per Share) and inter-sectoral performance.

Initially, companies which were categorised under ‘Navratna’ in the year 1997 are  ECIL, BHEL, BPCL, HPCL, IOC, IPCL, NTPC, ONGC, SAIL and VSNL. But this figure has been changed over a period of time, and presently, the number of companies which are categorised under ‘Navratna’ Category are as follows –

       Bharat Electronics Limited 
Bharat Petroleum Corporation Limited
Coal India Limited
GAIL (India) Limited
Hindustan Aeronautics Limited
Hindustan Petroleum Corporation Limited
Mahanagar Telephone Nigam Limited
National Aluminium Company Limited
NMDC Limited
Oil India Limited
Power Finance Corporation Limited
Power Grid Corporation of India Limited
Rural Electrification Corporation Limited
Shipping Corporation of India Limited
Vishakapatnam Steel Plant

Now one might be thinking as to why the name of ONGC is missing from the list of ‘Navratna Companies’ mentioned above. In the year 2009, ‘Maharatna Status’ was introduced by the Government of India, which consist of four companies : IOC, NTPC, ONGC ans SAIL. Introduction of ‘Maharatns Status’ has raised a company’s investment ceiling to 5,000 crore, unlike 1000 crore in case of ‘Navaratna’ Companies. Moreover, these companies would now be free to decide on investments up to 15 per cent of their net worth in a project. In order to qualify for ‘Maharatna’, a company has to pass certain criteria which includes a) Having Navratna status; b) Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations; c) An average annual turnover of more than Rs.25,000 crore during the last 3 years etc.  Moreover, the lowest employee should be proud of the company which he is working for.

Even after getting ‘Maharatna Status’, ONGC has remained a company categorized under ‘Navratna’ status. The reason why ONGC is still a 'Navratna' PSE is that it could never exercise this status as it did not meet the requirement of having equal number of executive and non-executive directors on its board.

Why ONGC is  Loosing ‘Navratna’ Status ?

ONGC is the most profitable firm in India, which would lose ‘Navratna Status soon. This is due to its rush to the Rs 11,500 crore share sale scheduled next month.  The Indian Government has decided to withdraw both of its directors who are currently present on the ONGC Board. This move has been made so that ONGC would be able meet the SEBI norms of having equal number of functional and independent directors to allow Rs 11,500 crore public offering (FPO) on April 5. Unfortunately, this move would remove ONGC from list of the companies mentioned under ‘Navratna Status’. ONGC has six functional directors, besides the chairman. It also has two government-appointed nominee directors, taking the total strength of functional/promoter directors to nine. Against this, it has four independent directors and needs five more to meet the SEBI's listing norm.

It has been reported in several newspapers that former Oil and Petroleum Minister Murli Deora had selected five persons to be included in ONGC board. But before these names could go to the Cabinet Committee on Appointment, Deora was replaced by S. Jaipal Reddy as the minister, who didn’t send these names to the Cabinet Committee on Appointment. Later on, he sent only two names to the committee and before it could get approved by the committee; S V Rao was appointed Director (Exploration) of ONGC whose appoint was invalid as a serving executive cannot be appointed as an independent director on a PSU board. The other person chosen by the Oil Ministry also failed to meet the guidelines in order to get appointed as directors, which has come out as the main cause of this situation. It would be quite unfortunate to see ONGC loosing ‘Navratna’ Status


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