What Happened
- A corporate governance survey by Excellence Enablers — led by former SEBI chairperson M. Damodaran — covering all 40 Maharatna and Navratna PSUs found significant board-level governance gaps
- 36 out of 40 Maharatna and Navratna companies had fewer independent directors on their boards than the minimum prescribed by SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations for at least one financial year between FY2022 and FY2025
- 32 out of 40 companies failed to submit the mandatory secretarial compliance report as required by SEBI for all four financial years (FY22–FY25)
- 17 companies had no woman director on their board — despite SEBI and Companies Act requirements mandating at least one woman independent director
- 21 companies did not disclose succession planning details for any of the four years reviewed
- Women directors represent only 11% of total directors across the surveyed PSUs — far below best governance practices
- The report is informally referred to as the "Sutra" report in media coverage
Static Topic Bridges
Maharatna, Navratna, and Miniratna: Classification and Powers
India's Central Public Sector Enterprises (CPSEs) are classified into a three-tier "Ratna" system — Maharatna, Navratna, and Miniratna — based on financial performance and operational scale. This classification, introduced by the Department of Public Enterprises (DPE) under the Ministry of Finance, grants graduated financial and operational autonomy to boards of CPSEs, reducing the need for case-by-case government approval.
- Maharatna (14 as of 2025): Highest autonomy tier
- Eligibility: Must be a Navratna with average annual turnover ≥ ₹25,000 crore, net worth ≥ ₹15,000 crore, net profit ≥ ₹5,000 crore (averaged over 3 years), significant global presence, listed on Indian stock exchange
- Powers: Can invest up to ₹5,000 crore OR 15% of net worth in a single project without government approval; can enter JVs, establish wholly-owned subsidiaries, undertake mergers and acquisitions in India and abroad
- Examples: ONGC, IOCL, NTPC, BHEL, CIL, SAIL, GAIL, BPCL, HPCL, PFC, REC, PGCIL, OIL India, HAL (added October 2024)
- Navratna (26 as of 2025): Mid-tier autonomy
- Can invest up to ₹1,000 crore or 15% of net worth per project without approval
- Miniratna (65): Entry-level autonomy; two categories (Cat I and Cat II)
- The system was introduced in 1997 (Navratna), with Maharatna added later in 2010
Connection to this news: The governance survey covers all 40 Maharatna and Navratna PSUs — entities with the highest financial autonomy and responsibility in India's public sector. The irony that greater autonomy has not translated to better governance compliance is central to this story. The lack of independent directors undermines the very purpose of the Ratna classification — empowered, professionally governed boards.
Corporate Governance Norms for CPSEs: SEBI LODR and DPE Guidelines
CPSEs listed on Indian stock exchanges are subject to SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, which prescribe board composition, disclosure, and governance standards. Additionally, the Department of Public Enterprises (DPE) under the Ministry of Finance has issued separate Guidelines on Corporate Governance for CPSEs.
- SEBI LODR Regulations, 2015: Require listed companies to have:
- Minimum 50% independent directors on the board if Executive Chairperson is present; or minimum 1/3 independent directors otherwise
- At least one woman independent director on the board (mandatory since 2020 for listed entities)
- Secretarial Compliance Report: Annual filing certifying compliance with all SEBI regulations — mandatory for all listed companies
- Companies Act, 2013: Requires at least one woman director on boards of certain classes of companies (Section 149)
- DPE Guidelines on CPSE Governance: Require CPSEs to have independent directors, conduct board evaluations, maintain audit committees, and comply with SEBI LODR provisions
- Structural problem: Central Government appoints independent directors to CPSE boards through a bureaucratic process — delays and vacancies are chronic, contributing to governance gaps
- Appointment mechanism: Independent directors in CPSEs are nominated by the administrative ministry — unlike private companies where shareholders elect them
Connection to this news: The finding that 36 of 40 Maharatna/Navratna PSUs had fewer than the minimum prescribed independent directors reflects the systemic delay in government appointments. Since independent director vacancies in CPSEs depend on Ministry notifications rather than shareholder votes, governance gaps persist structurally — a key reform challenge highlighted in the survey.
Board Governance and the Principal-Agent Problem in PSUs
The governance challenges in Indian PSUs illustrate the classic principal-agent problem — where the "agent" (CPSE management and board) may not always act in the best interest of the "principal" (government, and ultimately citizens/shareholders). Independent directors are supposed to check this misalignment by providing objective oversight.
- Independent Directors in CPSEs face dual accountability: to SEBI/LODR norms AND to the government that appoints them — creating potential conflicts
- Key governance gaps found: Absence of independent directors (36/40), missing woman directors (17/40), non-filing of secretarial compliance reports (32/40), lack of succession planning (21/40)
- Excellence Enablers survey: Conducted by former SEBI chief M. Damodaran — lends credibility and regulatory significance
- Gender diversity: Women constitute only 11% of directors in surveyed PSUs — vs. an all-India listed company average that, while low, is higher in well-governed private sector firms
- Succession planning gap: 21 companies disclosed no succession plans for 4 years — a critical governance risk for entities managing critical national infrastructure
- SEBI's recent scrutiny: SEBI is increasingly monitoring CPSE governance as these companies carry significant public shareholding
Connection to this news: The Excellence Enablers report acts as an external governance audit of India's top public sector enterprises. For UPSC Mains, this illustrates the tension between state ownership and professional governance — the "Ratna" status signals financial strength but does not automatically translate to boardroom best practices. Reforms in CPSE governance — faster independent director appointments, mandatory succession planning, gender diversity targets — are increasingly relevant policy debates.
Key Facts & Data
- Survey by: Excellence Enablers, led by former SEBI chief M. Damodaran
- PSUs surveyed: All 40 Maharatna and Navratna companies
- Missing minimum independent directors: 36 out of 40 PSUs (in at least one year, FY22–FY25)
- Failed to file secretarial compliance report: 32 out of 40 (for FY22–FY25 period)
- No woman director on board: 17 companies
- No succession planning disclosed: 21 companies (over 4-year period)
- Women directors as % of total directors: Only 11%
- Number of Maharatnas (2025): 14 (latest addition: HAL, October 2024)
- Number of Navratnas (2025): 26
- Maharatna investment autonomy: Up to ₹5,000 crore or 15% of net worth per project without government approval
- Maharatna eligibility threshold: Net profit ≥ ₹5,000 crore, turnover ≥ ₹25,000 crore, net worth ≥ ₹15,000 crore (3-year average)
- SEBI LODR requirement: Minimum 1/3 independent directors (without executive chairperson) or 50% (with executive chairperson)
- Governing framework: SEBI LODR Regulations 2015, Companies Act 2013, DPE Guidelines on CPSE Governance
- Navratna system introduced: 1997; Maharatna status added: 2010