FREEDOM HOPE FOR NAVRATNAS 

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By BY PALLAB BHATTACHARYA in Calcutta
  • Published 3.11.01
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Calcutta, Nov. 3 :    Calcutta, Nov. 3:  The government is considering a proposal to remove investment caps from the Navratna charter to enable the nine public sector majors, including Indian Oil Corp, Oil and Natural Gas Corporation, take independent decisions on forging joint ventures. At present, the nine PSUs cannot put more than 15 per cent of their net worth in a joint venture, with a 5 per cent cap on investment in a single entity. Moreover, they have to seek government approval if the amount exceeds more than Rs 200 crore. Sources said once the caps are lifted, the boards of the navratnas will be free to take all investment decisions on their own. The government is expected to amend the charter once the Cabinet takes a formal decision on the issue. "The government has, in principle, agreed to provide more autonomy to the navratna companies in order to give them a level playing field with private sector competitors. Moreover, approaching the government for every decision does not encourage investment," sources said. ONGC chairman Subir Raha said the removal of these restrictions will give the PSUs a free hand in forging partnerships. "The removal of investment caps will give the navratna companies more autonomy and freedom as far as decision making is concerned," Raha said. The Navratna charter was issued in July 1997 to provide some operational autonomy to the nine jewels in the government's kitty. However, the Steel Authority of India Ltd (SAIL), which is also a member of the profit-making PSU club, later slid into the red owing to the persistent recession in the steel industry. An amendment to the charter will give major boost to the nine companies, especially to oil majors ONGC and IOC, which are bracing up for the deregulated regime in April. "Both ONGC and IOC are now busy working on their respective investment strategies so that they can successfully take on the competition both from domestic and multinational companies," sources said. A senior IOC executive said the very basis of creating navratna companies was to allow more freedom. "If the investment caps are withdrawn, it will have a tremendous impact on the strategy of these PSUs including IOC," he said. IOC, for instance, has plans to invest over Rs 460 crore in Haldia Petrochemicals in West Bengal subject to certain preconditions. The relaxation in navratna investment norms will enable the company take a decision on HPL without having to wait for the government's nod.