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Indian Economy / Industry Sector

Memorandum of Understanding in PSEs


    Memorandum of Understanding ( MoU ) is a relationship between Public Sector Enterprises ( PSEs ) and the Government. It was recommended by Arjun Sengupta committee.

    Memorandum of Understanding

    • It outlines the mutual obligations between the Government and the PSEs.
    • It is a performance evaluation instrument and is an attempt to balance the autonomy and accountability of the PSEs.
    • Within the agreed parameters, the CEO of the PSE is given autonomy to achieve the results.
    • Based on the concept of Memorandum of Understanding, Navratna and Maharatna companies got evolved.

    Navratna Companies in India

    • The concept of Navratna company was evolved during the budget of the financial year, 1997-98.
    • The objective is to allow the PSEs to grow into global giants.
    • Appropriate packages of autonomy were given in various fields of operation. These PSEs can invest upto Rs. 1000 Crore in Joint ventures and can incur capital expenditure.
    • The board of the PSEs can independently go ahead with mergers and acquisitions subject to the above monetary ceiling.
    • The list of Navratna companies in India are -
      • Bharat Electronics Limited ( BEL ), Engineers India Limited ( EIL ), Container Corporation of India Limited ( CCIL ), Hindustan Aeronautics Limited ( HAL ), Hindustan Petroleum Corporation Limited ( HPCL ), National Aluminum Company Limited ( NALCO ), Mahanagar Telephone Nigam Limited ( MTNL ), National Buildings Construction Corporation Limited ( NBCC ), National Mineral Development Corporation Limited ( NMDC ), Neyveli Lignite Corporation India Limited ( NLCIL ), Power Finance Corporation Limited ( PFC ), Oil India Limited ( OIL ), Power Grid Corporation of India Limited ( PGCIL ), Rural Electrification Corporation Limited ( REC ), Rashtriya Ispat Nigam Limited ( RINL ) and Shipping Corporation of India Limited ( SCI ).

    Maharatna Companies in India

    • The concept of Maharatna has been evolved during the year 2009.
    • A Navratna company should satisfy the following conditions to become a Maharatna company
      • It should be listed PSE and should have international operations having significant global presence.
      • There should be an average turnover of more than Rs. 25,000 Crore, net profit after tax ( PAT ) of Rs. 5000 Crore and networth of the company be Rs. 15,000 Crore in the last 3 years.
    • These Maharatnas will be free to invest upto Rs. 5000 Crore for joint ventures or for wholly owned subsidiaries.
    • The list of Navratna companies in India are -
      • Bharat Heavy Electricals Limited ( BHEL ), Gas authority of India limited (GAIL), Coal India Limited ( CIL ), Indian Oil Corporation Limited ( IOCL ), Steel Authority of India Limited ( SAIL ), National Thermal Power Corporation Limited ( NTPC ), Oil and Natural Gas Corporation Limited ( ONGC ) and Bharat Petroleum Corporation Limited ( BPCL ).