The three Maharatnas – ONGC, SAIL and NTPC – are being given more flexibility

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on investments in India and abroad.

The central government proposes to allow the boards of these Maharatna to take investment decisions up to Rs 10,000 crore without the need to seek government approval.

“After assessing the impact of recent hike, we propose to double the investment limit for Maharatnas in domestic and acquisitions abroad to Rs 10,000 crore,” secretary of Department of Public Enterprises Bhaskar Chatterjee told Financial Chronicle.

On December 23 last year, the Cabinet Committee on Economic Affairs had increased the investment limit of these Maharatnas to Rs 5,000 crore from an earlier Rs 1,000 crore. The financial autonomy limit for existing 18 Navratna companies, which include BHEL, GAIL and IOC, may also be doubled to Rs 2,000 crore from Rs 1000 crore. This would be in sync with the move on Maharatnas.

Giving further financial autonomy to the top three public sector enterprises would help them scout around for investment opportunities in India and abroad in their respective sectors — petroleum, steel and power.

“Even Rs 5,000 crore limit is huge. These funds can be leveraged to mop up more debt and equity resources to make very large acquisition abroad, given the enterprise valuations of most companies internationally” said Chatterjee.

The flexibility being accorded to Maharatnas may boost India’s efforts to secure energy interests internationally through acquisitions and hunt for fresh oil and gas assets through ONGC’s international arm, ONGC Videsh.

“The decision will help provide the company with more financial autonomy compared with the previous limit of Rs 1,000 crore. If this happens, it will trigger large acquisitions abroad broad-basing our energy security campaign” said a top ONGC official on condition of anonymity.

Earlier, on acquisition of Maharatna status, ONGC chairman & managing director R S Sharma had told FC that this would allow the company autonomy to acquire assets, set up joint ventures and become globally more competitive. “Besides, empowering the Board to decide on investments up to Rs 5,000 crore, it will allow us to decide on equity investments, mergers and acquisitions up to 15 per cent of the company’s networth in a project, limited to an absolute ceiling of Rs 5,000 crore and within an overall ceiling of 30% of the networth,” he had said.

ONGC’s was not clear whether OVL’s investment abroad would get covered under the Maharatna status. This was clarified by the Chatterjee. “Once the ONGC board endorses, OVL, the hundred per cent subsidiary, can now acquire assets up to Rs 5000 crore,” Chatterjee said.

NTPC chairman and managing director R.S.Sharma was not available for comment. SAIL’s chairman & managing director, S K Roongta had told this newspaper on December 23 that the company would use the financial flexibility given toa Maharatna to source raw materials on a long-term basis from overseas markets. SAIL could now even look at picking up controlling stakes in foreign companies. “This will ensure long-term security in input supplies,” he had said. Doubling the limit now would allow SAIL to look at larger companies for cost effective supplies to keep steel prices stable in domestic markets.

The three Maharatnas are listed companies with an aggregate annual turnover of over Rs 25,000 crore, a networth of Rs 15,000 crore and net profits of Rs 5,000 crore in the past three years.

It is likely that listed Navratnas like BHEL, GAIL and IOC would also get the Maharatna status once they meet the turnover, net worth and net profit thresholds set by the cabinet. Flexibility on financial decision-making would only push top Navratnas to reach for the Maharatna status, a top official said.

Navratna status was conceived in 1997 by the then finance minister P Chidambaram in his ‘dream budget’. There are 18 Navratnas. The main Maharatna objective is to empower mega central public sector enterprises to expand and become globally competitive, information & broadcasting minister Ambika Soni had told reporters after the December 23 cabinet decision. She had said that the procedure for grant of the Maharatna status, as well as its review, would be similar to that for Navratnas.