BHEL, SAIL get 1-year ultimatum on Maharatna status 2026

What the government’s notice means

The central government has put Bharat Heavy Electricals Ltd (BHEL) and Steel Authority of India Ltd (SAIL) on a one-year notice to improve financial performance, according to official documents. If their performance does not improve within the stipulated period, the two public sector undertakings could be downgraded from Maharatna to Navratna status. That would mark the first instance of Maharatna companies being placed on notice with an explicit threat of a status downgrade. The move places immediate attention on profitability as a key benchmark, not only scale. It also signals that legacy designations will be reassessed against defined criteria. For investors tracking PSU policy, the development matters because “Ratna” status directly affects governance autonomy and capital allocation flexibility.

Why BHEL and SAIL are under scrutiny

An official assessment found that BHEL and SAIL do not meet the Maharatna criterion of maintaining an average annual profit after tax (PAT) of more than ₹5,000 crore over the last three years. The documents indicate these are the only two companies among India’s 14 Maharatnas that failed to meet the required parameters on this metric. While the assessment focuses on the profit threshold, Maharatna eligibility is evaluated across multiple financial and operational criteria. In practical terms, the notice gives both firms a defined time window to demonstrate improvement. It also creates a formal trigger for tighter oversight by the administrative ministries. For BHEL and SAIL managements, the timeline increases pressure to show measurable progress on profitability.

Maharatna eligibility rules cited in the assessment

The eligibility framework referenced in the assessment uses averages over the preceding three years. Apart from the PAT threshold, the requirements include an average turnover of more than ₹25,000 crore, net worth of over ₹15,000 crore, and “a significant global presence or international operations.” The assessment highlights that BHEL and SAIL fell short on the profitability requirement. The remaining criteria are part of the same screening, although the documents cited the profit shortfall as the key gap. The combination of financial thresholds and global presence is meant to filter for consistently strong, large, and internationally active CPSEs.

What changes if Maharatna status is downgraded

A potential downgrade to Navratna status would reduce the autonomy of company boards. The biggest immediate operational difference highlighted in the documents is the equity investment limit allowed without government approval. Maharatna companies can make equity investments of up to ₹5,000 crore without government approval. For Navratnas, the corresponding limit is ₹1,000 crore. This shift would increase the frequency of government sign-offs for larger investment decisions. It can also influence execution speed for strategic initiatives that involve equity commitments.

Committee-led review and the role of TV Somanathan

In both BHEL and SAIL cases, a committee headed by Cabinet Secretary TV Somanathan made the recommendation that led to the notice. The committee had conducted a re-evaluation of central public sector enterprises (CPSEs) and recommended measures to improve performance. These included stricter financial parameters and tighter corporate governance requirements. The review also built in the option of stripping a CPSE of its “Ratna” status, a policy lever now being tested through this notice process. The committee also reviewed the Maharatna categorisation to align it with contemporary market dynamics.

Why the criteria are being revisited for 2025 price levels

Niti Aayog representatives who attended the meetings pointed out that the thresholds for turnover, net worth, and PAT were defined in 2010 and “have not been adjusted or revised to reflect the real values.” In response, Somanathan asked the Department of Public Enterprises (DPE) to rework the eligibility criteria for upgrades to Maharatna status after indexing them to 2025 prices. Once the criteria are reworked, a performance review of all public sector companies is to be carried out by the DPE on the basis of the revised benchmarks. This suggests the government wants the framework to reflect current price levels and economic scale.

Turnaround plans sought from the heavy industries and steel ministries

Alongside the notice, the ministries of heavy industries and steel have been instructed to present a detailed plan on how BHEL and SAIL could deal with weak financial performance, including low profitability. The instruction indicates a structured approach, with accountability placed on both the companies and their administrative ministries. The heavy industries ministry has also stated that work has begun on a new plan to improve BHEL’s financial performance and that improvement in profitability is becoming visible. The documents do not provide specific profit numbers for this improvement, but they frame it as part of the response expected over the one-year period. For SAIL, the directive similarly focuses on profitability and performance improvement.

Market impact: what investors should track

The notice introduces a measurable governance risk around capital allocation autonomy, because a downgrade would lower the threshold for investments that require government approval from ₹5,000 crore to ₹1,000 crore. That can affect how quickly large investment proposals move from boards to execution. It also sets a precedent that Ratna status can be actively reviewed and potentially withdrawn based on performance against criteria. Separately, the broader review of CPSE evaluation norms, including indexing thresholds to 2025 prices, could lead to changes in how investors compare PSU performance across cycles. Since the government plans a fresh performance review after the DPE reworks criteria, the impact may extend beyond just BHEL and SAIL.

Analysis: why this is a policy signal beyond two companies

The government’s step appears aimed at reinforcing that Maharatna status is contingent on sustained performance, not only historical scale. A senior official was quoted as saying Ratna status “cannot be taken for granted” and significant deviation from prescribed criteria will result in downgrade. The fact that only two of 14 Maharatnas were flagged for failing the PAT threshold makes this action more targeted than a broad-based classification reset. At the same time, the decision to revisit 2010-era thresholds and index them to 2025 prices suggests the classification architecture itself may change. That combination - enforcement on existing rules plus recalibration of benchmarks - is likely to shape governance expectations for CPSE boards.

Conclusion

BHEL and SAIL have one year to demonstrate improvement in profitability after the government flagged non-compliance with the average PAT threshold of more than ₹5,000 crore. The notice is significant because it is the first instance of a Maharatna downgrade being explicitly put on the table, with direct implications for board autonomy and investment limits. The committee chaired by Cabinet Secretary TV Somanathan has also pushed for re-indexing Maharatna eligibility criteria to 2025 prices, followed by a broader DPE-led performance review of PSUs. The next key milestones are the turnaround plans to be presented by the heavy industries and steel ministries, and the DPE’s reworked criteria that will guide the forthcoming review.