Indian Railways’ newly inducted Navratna PSU IRCTC plays a significant role in Ticket Booking and Catering
With Navratna status to IRCTC, the total number of Indian Railways’ Navratna CPSEs is now seven. Total number of Navartna Companies has risen to 26 and India now has 14 Maharatna Companies. So what does the new status mean for IRCTC?
Navratna Status for IRCTC: A Significant Milestone
Established in September 1999 as a public sector undertaking ( PSU), It was completely owned by the Indian government and was set up to professionalise and upgrade the catering and hospitality services provided at various Indian railway stations, on the trains that passed through, and other associated locations.
IRCTC was created to support tourism in India and abroad by developing budget hotels, special tour packages, and promotional information. This was part of an effort to make Indian Railways more focused on customers and financially sustainable.
What does it take for a CPSE to become a Navratna?
The Department of Public Enterprises (DPE) evaluates which PSUs should receive Navratna status based on six main criteria.
(i) Ratio of net profit to net worth.?
(ii) Ratio of manpower cost to total cost of production or services.?
(iii) Ratio of profit before depreciation, interest, and tax (PBDIT) to capital employed or return on capital employed.?
(iv) Ratio of profit before interest and taxes (PBIT) to turnover.?
(v) EPS ie earning per share.?
(vi) Inter-sectoral performance of the company.?
These six indicators carry weights from 10 (for earning per share) to 25 (for ratio of net profit to net worth). Apart from these six indicators, the PSU must have an ‘excellent’ or ‘very good’ rating.?
If a CPSE has a composite score of 60 or more on all six indicators, and has received an Excellent or Very Good MOU rating in three of the last five years, it can be considered for Navratna status.
Liberty to Do Business Beyond Boundaries
Navratna status simplifies business decision-making by removing bureaucratic hurdles, granting financial autonomy to company boards. This allows PSUs like IRFC to invest up to Rs 1,000 crore or 15 percent of their net worth in projects without needing government approval, which is crucial for making swift decisions in a dynamic financial market.
Another liberty is that Navratna PSUs can form joint ventures and subsidiaries, and enter into mergers or acquisitions without direct government intervention. They can also make independent business and investment decisions to compete with private sector companies.?
More importantly, Navratna PSUs can form strategic alliances and expand globally without strict bureaucratic hurdles as they are considered financially stable, which helps them attract more investors and provide better returns to shareholders.
