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Mainstream, VOL LV No 25 New Delhi June 10, 2017

Sovereignty and Security: Questioning the wisdom of privatising PSU-s

Saturday 10 June 2017, by S G Vombatkere

The Government of India (GoI) has decided to go ahead with “strategic sale” to a “strategic partner”, of 26 per cent of its present 54 per cent share in the Bharat Earthmovers Ltd (BEML), which produces critical hardware for India’s Armed Forces (military, for short). Disinvestment of GoI shares in public assets orginated in Congress times, but disinvestment of a defence-sector PSU is a “first” which the BJP-led NDA-2 Government can claim. The strategy behind the sale is questionable, especially since the GoI loses control over policy and production in the BEML. It is a moot question whether India’s sovereignty and security were considered before the decision was taken, despite objections and questions from within the establishment, supported with facts and figures from government sources. But the matter is questionable also from a public angle.

National Strategy

India is a sovereign, democratic Republic created by We The People. India’s sovereignty—terri-torial, political and economic—is not negotiable and cannot be compromised. If the coin of national strategy is tossed, the Republic can survive only if “sovereignty” and “security” are its two sides. “Security” is provided by the military, which can ensure sovereignty only if both the soldier and his “gun” (military hardware) are Indian.

This is not to suggest that every bit of military hardware has to be Indian, but that policy and production of critical hardware like weapons, weapon systems, equipment and vehicles, and critical expendables like ammunition (“critical items”, hereinafter, to include critical components) should be under the control of the GoI. Of course, in emergent circumstances or the short-term, imports of critical items may have to be resorted to, but for the middle-term, indigenous production must be geared-up and imports reduced, while for the long-term, 100 per cent indigenous production of critical items should be achieved. National strategy in consultation with the military should spell out which are critical items, the time-line or targets, and the policy for sovereignty and security through indigenous production of critical items.

Indigenisation

Public money was used to build PSUs as public assets for the purpose of indigenous production. It can and has been argued that if Indian corporations produce critical military items in India, it should satisfy the sovereignty issue. Noting that corporations are not under control of governments, this argument is fraught with consequences.

In present times, a corporation may be registered in a particular country (like, say, an Indian corporation), but acquisitions and mergers are the order of the day, and what started out as an Indian corporation could well be taken over by a foreign business entity, and become subject to its business interests. Thus, whatever little, if any, say that the GoI had in its policy and production would be lost. Such a corporation, if engaged in production of critical items for India’s defence, can hold the country to ransom, thus setting a price on sovereignty and security.

Indigenisation of production of critical military items with the GoI’s control over policy and production is thus an integral part of non-negotiable sovereignty and security, and gearing-up defence PSUs and ordnance factories (OFs) is an inescapable part of national strategy. If the PSUs are deemed “inefficient” (which is not across the board), the onus of making them “efficient” lies on GoI. Selling them off, strategically or otherwise, is no solution.

This does not imply that manufacture in India by the private sector is to be abjured. Private sector manufacturing capacity needs to be used to produce sub-critical items which are used by the PSUs to produce critical assemblies or critical systems, with control over policy and secrecy with the GoI.

At least insofar as India’s sovereignty and security are linked with its critical military hardware, “Make in India” has to be extended to “Make by India, for India”. Therefore defence PSUs and OFs which produce the “gun” are as much a part of India’s defence of sovereignty and security as the soldier, who is “the-man-behind-the-gun”.

Sovereignty trumps Business

Loss of government control over policy and production of critical military hardware and expendables by disinvestment or privatisation of PSUs and OFs cannot be anything other than faulty national strategy. Even if it makes business sense to go for “strategic sale” of these public assets to a “strategic partner”, it needs to be emphasised that national strategy is about sovereignty and security and not about business profits.

Bottom line

The BEML is the first defence PSU up for “strategic sale”, but other PSUs, like HAL, BEL, BHEL, BDL, GRSE and MIDHANI (see Note for expansions), some of them “navratnas”, and some OFs are also in process of disinvestment or sale.

Sale of defence PSUs will entail enormous and unacceptable loss of infrastructure and land, and perhaps more importantly, irreparable loss of trained human resource working for the national cause of sovereignty, security and national pride through self-reliance and indigenization. On the other hand, it will create dependence on foreign entities, and amount to a self-goal obviously not in the national interest.

Especially since India is the world’s largest importer of military goods, the GoI would do well to review its national strategy concerning critical items for its military so that India’s sovereignty and security are assured, and drop “strategic sale” of defence PSUs, which will only benefit corporations.

Note

HAL=Hindustan Aeronautics Ltd; BEL=Bharat Elect-ronics Ltd; BHEL=Bharat Heavy Electricals Ltd; BDL=Bharat Dynamics Ltd; GRSE=Garden Reach Shipbuilders & Engineers Ltd; MIDHANI=Mishra Dhatu Nigam Ltd. Other PSUs closely connnected with defence, and whose privatisation will directly and seriously affect India’s sovereignty due to their close relation to defence production and operational preparedness are: MDL (Mazagon Docks Ltd, Mumbai), HSL (Hindustan Shipyard Ltd, Visakhapatnam), CSL (Cochin Shipyard Ltd), GSL (Goa Shipyard Ltd), PSUs engaged in petroleum survey, extraction and processing (ONGC, IOCL, BPCL, HPCL, Oil India, etc), and SAIL (who produce various indigenously developed grades of steel for our warships and submarines.)

Major General S.G. Vombatkere, VSM, retired as the Additional DG, Discipline and Vigilance in the Army HQ AG’s Branch. With over 520 published papers in national and international journals and seminars, his area of interest is strategic and development-related issues.

ISSN : 0542-1462 / RNI No. : 7064/62