Navaratnas: Empowering Public Enterprises for Global Expansion and Efficiency

Navaratnas and Public Enterprise Policies: Empowering Efficiency and Global Expansion

The concept of Navaratnas, or Nine Jewels, draws its origins from the Imperial Court of King Vikramaditya, where exceptional individuals excelling in the fields of art, literature, and knowledge were recognized. In 1996, the Indian government adopted a similar approach for public sector enterprises (PSUs) to enhance their efficiency, professionalism, and competitiveness in the liberalized global environment. Nine PSUs were designated as Navaratnas, receiving greater managerial and operational autonomy to improve their efficiency and profitability. Additionally, 97 other profit-making enterprises were conferred the status of Mini Ratnas, benefitting from increased operational, financial, and managerial independence.

The Navaratna Companies:

The initial set of Navaratna companies comprised Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), Oil and Natural Gas Corporation Ltd (ONGC), Steel Authority of India Ltd (SAIL), Indian Petrochemicals Corporation Ltd (IPCL), Bharat Heavy Electricals Ltd (BHEL), National Thermal Power Corporation (NTPC), and Videsh Sanchar Nigam Ltd (VSNL). Subsequently, two more PSUs, Gas Authority of India Limited (GAIL) and Mahanagar Telephone Nigam Ltd (MTNL), were also bestowed with the Navaratna status.

Origins of PSUs and Policy Shift:

Many of these profitable PSUs were established during the 1950s and 1960s, driven by the principle of self-reliance in public policy. They were created with the purpose of providing essential infrastructure and direct employment opportunities, ensuring the delivery of quality end-products to the masses at affordable prices, while being accountable to all stakeholders. The designation as Navaratnas significantly improved the performance of these companies.

Policy Shift and Future Direction:

However, some scholars argue that instead of enabling the expansion of Navaratnas and facilitating their transformation into global players, the government engaged in partial privatization through disinvestment. In recent times, the government has decided to retain the Navaratnas in the public sector and empower them to expand in global markets and raise resources independently from financial markets.

The concept of Navaratnas aimed to elevate the efficiency and competitiveness of select PSUs by providing them greater managerial autonomy. While some concerns were raised about partial privatization, the current direction points towards fostering growth and global expansion within the public sector framework. The government's decision to retain and support Navaratnas in their journey towards self-sufficiency and global prominence reflects a commitment to strengthening the public enterprise sector.

Related information -

Privatising only loss-making companies is a common approach taken by governments in some cases, but it is not the only criterion for privatisation. The decision to privatise a company depends on various factors, and both profitable and loss-making companies may be considered for privatisation. Here are some reasons why governments may consider privatising loss-making companies:

Cost Reduction and Efficiency: Loss-making companies often face financial challenges, and their inefficiencies may be a burden on the government's resources. Privatisation can introduce private capital and expertise, which may lead to cost reduction and operational efficiency, turning around the financial performance of the company.

Focus on Core Functions: Governments may decide to focus on their core functions, such as policymaking and regulation, rather than managing and financing loss-making enterprises. Privatisation can allow the government to concentrate on essential functions and delegate commercial activities to the private sector.

Encouraging Competition: Privatisation can introduce competition in sectors dominated by state-owned enterprises. This competition can lead to improved services, innovation, and better value for consumers.

Investment and Modernization: Privatisation may attract private investors willing to inject funds for the modernization and expansion of the company, which could lead to improved productivity and competitiveness.

However, it is essential to consider some potential challenges and concerns when privatising only loss-making companies:

Social Impact: Loss-making companies may be providing essential services or employment opportunities, and privatisation could have social implications, such as job losses or changes in service accessibility.

Equity Considerations: The process of privatisation should be transparent and equitable to ensure that benefits are not concentrated in the hands of a few, and the broader public interest is safeguarded.

Regulatory Framework: Effective regulations are necessary to prevent potential abuses of market power by the private sector and to ensure fair competition.

Public Interest: Governments need to carefully assess the long-term implications of privatisation on sectors that are critical for national security or public welfare and consider how to protect the public interest in such cases.

In summary, the decision to privatise a company should be based on a thorough analysis of its financial health, strategic importance, and potential benefits. While privatisation can address inefficiencies and attract investment, it should be implemented thoughtfully, considering the broader economic, social, and regulatory context.