Privatisation, capitalism and India

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The move of privatising government organisations has become the order of the day in India. In its recent decision, the Indian government led by Prime Minister Narendra Modi decided to disband the Ordnance Factories Board (OFB), under the department of defense production. It now wants to convert its 41 units into seven wholly-owned corporate enterprises. The move of the government is set to reshape over three hundred years old history of new-age armament manufacturing in India. In its favor, OFB is among the rare government departmental organisation that has performed extremely well over the years, making it the country’s largest defense producer with an annual turnover of around USD 3 billion apart from being India’s biggest armament exporter. Since its foundation in 1802, the OFB has allowed its factories full freedom to operate as independent entities. While the board performed as the apex-level policymaker and coordinator.

Having said this, the government decision seems to be bizarre as it disrupts this perfectly rolling system. Interestingly, the government went a step further by issuing an ordinance that makes going on strikes illegal for OFB employees just before its decision of going private. This means that the government had already anticipated widespread employee protests against OFB’s corporatisation. But what could be the reason behind the government shunning the major OFB employees’ unions before deciding on the future structure of the organisation? Many believe that the government’s move indicates the prospect of their selective privatisation or even sale in due course. Maybe this is the reason why the government is bent on making seven companies when the OFB has only five operating divisions at present. The government’s decision is reported to directly affect over eighty thousand employees of OFB. Even if the government ordinance has prohibited the OFB employees from going on strikes, it’s going to be a herculean task for the government to privatise the same.

On the other hand, the move of the government is being closely followed by India’s emerging private players in defense manufacture, including Tata Advanced Systems Limited (TASL), Reliance Naval and Engineering Limited, the Mahindra Group, Kalyani Strategic Systems Ltd, L&T Heavy Engineering, Hinduja group (Ashok Leyland Defence) and Adani Aero Defence Systems & Technologies Ltd, among others. It is interesting to note that the combined annual turnover of India’s all private sector enterprises in defense is only around USD 2.4 billion which is way below OFB’s annual sales. With the government’s move, now these private players may have an opportunity to take over one of the companies in the future, which would mean direct profits. Nevertheless, it is hard to understand any other reason for the move currently. Some may say that the move would ease the stress on OFB and pump in productivity. But OFB is already performing well and if COAL can run 400 mines and its nationwide network without being privatised, the move with OFB surely raises a lot of questions. Perhaps, the government does have a greater plan for the same in the good sense. Whatever be the reason, the fates of the OFB employees now hangs in balance until further clarification by the government.

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