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Opinion: It’s Imperative For India To Privatise Its Defence Sector. Here’s Why.

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The matter of privatization of Indian defence sector grabbed the attention of Indian media after PM Narendra Modi’s government came into power in 2014. After coming into power, this government first opened country’s defence sector to 49% foreign direct investment (FDI) in 2014 then to 74% in 2020 and 100% under the ‘approval route’, which was seen as a big step towards the privatization of the sector.

It was hoped that the decision will result in more access to modern foreign technologies. But the critics have criticized this measure of privatization by raising the issues related to unemployment, job loss and defence secrecy, which were likely to emerge from it. They argued that private companies will always be guided by profit motives due to which in the next few years, thousands of people working in defence manufacturing and production sector are going to lose their jobs and national security will also be compromised.

With these issues in the agenda, nearly four lakh defence civilian employees resolved to launch an indefinite strike between January 23 and 25, 2019, against the speedy privatization of the defence sector. The decision has been jointly announced by three major defence unions, namely, the All India Defence Employees Federation (AIDEF), Indian National Defence Workers Federation (INDWF), and the Bharatiya Pratiraksha Mazdoor Sangh (BPMS).

Again in June 2020, around 4 lakh defence civilian employees across the country showed interest in going on an indefinite strike from July to protest the corporatization of the Ordnance Factories Board (OFB) and the raising in the FDI limit in the defence manufacturing sector from 49% to 74%.

Privatising India’s defence sector/Representational image.

Problems That Plagued The Indian Defence Manufacturing Sector

From the time of independence till the early 21st century, strengthening the country’s defence manufacturing and production capabilities was never a point of focus of any of the governments. Instead of building their own capabilities, leaders were more focused on buying weapons, technologies and machinery from foreign countries, which later on made Indian armed forces completely depended on foreign partners in the time of war.

Again in 1991, manufacturing sector hit another setback when India opened its economy and exposed the infant Indian companies to the global competition and eventually it killed whatever private manufacturing companies were there. Thus, India never really had a dedicated defence manufacturing sector or private companies that can produce quality defence products for the country and so India never really got a chance to become a major manufacturing hub but had depended on others for major engineering and defence products.

India’s Red Tape bureaucracy cannot be ignored in this case as the bureaucrats were mainly authorized to carry out these tasks which they are often found to delay. Be it the Bofors scam, Jeep scandal or the Rafale deal, there has always been something that comes up hindering the growth and development of the deals.

The best example here to give is that of HAL Tejas, the concept which started in the 1980s to replace the MiG-21s took 36 years to get inducted into the 45th Squadron of Indian Air force in 2016. That’s 36 years of loot, distortions, postponements and changes in the bureaucracy. In the case of private manufacturing, if companies like TATA, L&T and Reliance Defence Ltd. manufacture for the country’s armed forces, it is sure that it will not take 36 years from the start to the induction of an aircraft.

Issues Relating To Public Sector Manufacturing Units

Privatization of the defence sector was the need of the hour for the country as public sector industries were not delivering quality products up to the requirements of our armed forces. Armed forces have witnessed faulty ammunition causing damage to the artillery guns, air defence guns and even the tanks used by the Indian army.

Moreover, the army’s primary assault rifle i.e. INSAS manufactured by OFB faced serious criticism from time to time for having problems like jamming and barrel blast. The country’s manufacturing sector has been known for delivering sub-standard weapons and ammunitions and this happens mainly due to the lack of competition in the respective field. The best example of this is the Bhabha Atomic Research Centre (BARC) employing over 14,000 employees and tasked to develop India’s nuclear ambitions.

But instead, as said by a BARC employee, everyone does their own personal work. The workshop which is capable of doing wonders now fails to even initiate research. Their jobs are secured, even if their performances degrade; they are only thrown to a lower department where they continue to suck the same salary. In some of the public sector units, there is the problem of surplus manpower which is creating drainage of resources unnecessarily leading to an increase in the unit cost of production. Political considerations have also contributed towards the overstaffing of unskilled workers in these units.

But the introduction of private companies in the defence sector is likely to solve many of these problems as it will create a competition among the various companies in order to grab the defence deals.

Benefits Of Privatization In India’s Defence Sector

  • Privatization will allow Indian companies to set up joint ventures with foreign companies which will give them access to modern foreign technologies. Then these joint ventures will be able to design, develop and manufacture sophisticated weapons in India.
  • Private companies entering will create a competition in the market, which will eventually ensure the quality of the products and will also keep the prices low, which will benefit our armed forces directly.
  • Privatization will allow Indian companies to meet the requirements of our forces on time and then to sell their products abroad.
  • So far India is buying weapons and technologies directly from foreign countries (e.g. Russia, Israel and the US) leading to a great loss of foreign reserves. Now developing those technologies in India and manufacturing locally will save a huge amount of foreign reserves every year.
  • Despite having the 3rd largest army in the world, the Indian army is often called the ‘vintage army’ as more than 65% of the weapons in its arsenal are Privatization will surely be going to give a boost to the process of modernization of the Indian armed forces.
  • Privatization of the defence sector will open doors for foreign countries to establish better ties with India and co-develop new technologies (e.g. the USA established strategic defence partnership with India after seeing the great potentiality of Indian defence market).
  • Producing quality defence equipment needs years of research, development and experience. Purchasing well developed and battle-proven foreign equipment has become very difficult due to the international observations and restrictions and cost is always a factor. But getting those technologies through ‘Transfer of Technology’ agreements and then manufacturing them locally in India can deliver great results.

These are a few examples of what good will be caused by privatization in the defence manufacturing sector. For our armed forces, the performance and the quality of the delivered products matter a lot. Privatization in the defence sector is a dangerous but good step that will always keep the defence civil employees and the companies under the hanging sword of quality check. Thus, the focus of the companies will always be on delivering sophisticated technologies and products of quality in a time-bound manner, as otherwise they can easily be replaced by others.

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