Recently, the Finance Minister approved a reworked mechanism for grading Central Public Sector Enterprises (CPSEs). This new mechanism allows CPSEs to be categorized into four different categories: A, B, C, and D. The categorization of CPSEs has significant implications for their organizational structure and the salaries of board-level incumbents.
As of June 26, 2023, there are 71 CPSEs in the A category, including well-known companies like NTPC, Indian Oil, ONGC, SAIL, and BHEL. The B category includes 68 CPSEs, such as Air India Assets Holding, Cement Corporation, Garden Reach, and others. There are 38 CPSEs in the C category and 5 CPSEs in the D category. Additionally, CPSEs are further classified into four groups: Maharatna (11 CPSEs), Navaratna (12 CPSEs), Mini Ratnas-1 (58 CPSEs), and Mini Ratnas-2 (10 CPSEs). These classifications define the financial and organizational powers of the CPSEs.
To simplify the process of upgrading or downgrading the categorization of existing CPSEs, a new Office Memorandum (OM) has been issued. Under this new process, initially categorized CPSEs can seek an upgrade in their schedule through the Public Enterprises Department (DPE), with the approval of their Administrative Ministry/Department. The DPE will examine the proposals and make a decision on the upgrade, with the final approval of the Finance Minister. This process eliminates the need to refer such proposals to the Cabinet Secretariat and the Public Enterprises Service Board (PESB).
Similarly, if there is a proposal to downgrade the categorization of a CPSE to a lower schedule, the same procedure will be followed. The proposals for categorization of CPSEs should be furnished to the DPE, with the concurrence of the Financial Advisor and the approval of the Minister-in-charge of the concerned administrative Ministry/Department. These proposals should include the performance of the CPSE over the last five years, considering quantitative parameters such as investment, capital employed, net sales, profit before tax, number of employees and units, capacity addition, and revenue per employee, among others.
In addition to these quantitative factors, qualitative factors related to the CPSE should also be considered. These factors include national importance, complexities of problems faced by the company, level of technology, prospects for expansion and diversification of activities, and competition from other sectors. Furthermore, information regarding share price, MOU ratings, Maharatna/Navratna/Miniratna status, and ISO certification is desirable.
Previously, the proposals for categorization of CPSEs were referred to the DPE, which would then process the proposals in consultation with the PESB. After processing, approval from the competent authority was obtained before notifying the schedule. However, with the new OM, explicit approval from the Finance Ministry has been mentioned as a requirement in the process.