New Delhi: The Union cabinet on Thursday approved a new policy allowing the acquisition of raw material assets outside India by state-owned companies with a three-year record of making profits, delegating more powers for such buyouts to the boards of so-called maharatna and navaratna public sector companies.

“Availability of raw material is a prerequisite not only for the growth of the manufacturing sector alone, but for the economy as a whole," information and broadcasting minister Ambika Soni told reporters after the cabinet meeting.

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Navaratnas and the bigger maharatnas are profitable state-owned companies. Those conferred the status have more financial autonomy than other state-owned companies, giving them the freedom to compete on an equal footing with private-sector rivals and global competition.

Thursday’s decision will allow them to acquire energy assets abroad without government reference. While navaratna firms will now be able to invest up to 3,000 crore in such assets abroad without needing government approval, for maharatna firms, the limit has been raised to 5,000 crore. The limit for both is currently 1,000 crore.

File photo of Ambika Soni (Bloomberg)

The cabinet also approved the registration of India Infrastructure Finance Co. Ltd (IIFCL) as a non-banking financial company (NBFC), effectively bringing it under the regulatory supervision of the Reserve Bank of India (RBI). IIFCL is a wholly owned government company that provides credit to infrastructure projects.

“Bringing IIFCL under the regulatory oversight of RBI with clearly defined prudential norms would be financially prudent and would sustain the long-term sustainability of the institution," the government said in a release.

The cabinet also approved an increase in the authorized capital of IIFCL to 5,000 crore from 2,000 crore, with a provision that it could be further raised to 8,000 crore after the finance ministry’s approval.

After its registration with RBI, IIFCL will be classified as an infrastructure finance company and will need to maintain a minimum capital adequacy ratio of 15%.

File photo Jairam Ramesh (Bloomberg)

The cabinet cleared a modification to the fund allocation under the National Rural Drinking Water Programme (NRDWP) to incentivize states to involve local bodies in the scheme’s implementation and to facilitate better quality of drinking water. NRDWP, a flagship programme of the United Progressive Alliance government launched in 2009, aims to provide every rural person with adequate water for drinking, cooking and other domestic basic needs on a sustainable basis and has a current budgetary allocation of 9,350 crore.

The Union cabinet on Thursday decided that the final 10% of funding will now take place in accordance with a formula involving a set of devolution indicators, instead of an ad hoc basis now.

“This will largely be an incentive to state governments for transferring planning and maintenance of rural water schemes to elected local bodies," said Jairam Ramesh, union minister for rural development and drinking water and sanitation. States such as Kerala, Gujarat, West Bengal and Tamil Nadu were likely to benefit the most from this devolution, he said.

To enhance the quality of drinking water, the cabinet also decided to earmark 3% of NRDWP funds to ensuring water quality.