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HomeDEFENCECorporatisation of Government assets – think before you act

Corporatisation of Government assets – think before you act

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Army Base Workshop

In the battle against Coronavirus pandemic, most Governments have been found wanting not in the capability of their health care systems but the capacity to rapidly scale up and deploy resources. One reason is the sheer scale of the spread of the contagion which has overwhelmed the healthcare infrastructure of even the most powerful and developed economies of the world. Another significant reason is the massive outsourcing of the manufacture of goods and services by many to a single source and closing down of organic industrial infrastructure that had served these countries so well during World wars, Cold war, and other emergencies like the 1918 flu pandemic.

In India too, similar practices were followed, despite the huge market available in the sub-continent in all segments of the manufacturing sector – be it electronics, pharmaceuticals, white goods, or even Diwali crackers. In pursuit of profits, no one could see the unfair trade practices and predatory pricing behind all this.  Also, the past several years have witnessed regular efforts at Corporatisation of Government assets like airlines, industrial undertakings, telecom, electricity services, etc. The principal criticism has been that these entities are inefficient, perpetually in the red, and need to be disposed of.

Howsoever the arguments may be justified on cost considerations alone; the current crisis has once again demonstrated the versatility of Government-owned enterprises and capabilities in responding to the crisis. The raison d`etre for this capability building over the years by setting up these enterprises was to create large scale Government-owned infrastructural capabilities that would act as spearheads for all-round development. It was assumed that both public and private sectors would play a complementary role in India`s march towards becoming a developed nation. However, due to lack of ownership and absence of a strategic vision, these units kept on losing vital ground. Due to poor performance, the Government decided to address this situation through the disinvestment process in 1991-1992. This was followed by strategic sales from 1999 -2000.

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Critics have argued that the strategic aim of Corporatisation of Government assets has never been clarified… The recent spate of failures in private businesses in the field of airlines, banks, real estate, industrial enterprises, telecom, and power has also demolished the argument that private sector businesses are run efficiently. It has become clear that there is hardly any relationship between efficiency and ownership. Today efficient units are being run both in the public and private sectors.

The current crisis has shown the effectiveness of the public sector in providing a quick response to national emergencies. Be it the setting up of quarantine facilities,  evacuation of Indian and foreign nationals from Corona hot spots around the world, setting up of treatment centers in Government hospitals, ramping up production of ventilators and PPEs it has been public enterprises all the way. Air India, IAF, Navy, Railways, doctors, paramedics, police have all given a stand out performance. They need to be given a salute with gunfire.

In the defence sector, Corporatisation of ordnance factories is an exercise to bring in cost efficiency. A much-needed reform as long as it ends up providing the required autonomy and brings in industry best practices to optimise costs and quality. It should not end up causing any major disruption and hold-ups as it could impact the country`s security. The Government is careful and is moving forward in a calibrated manner, repeatedly clarifying that it is aiming to corporatise and not privatise these strategic security assets. Partnering with the private sector could help enhance quality, cut down delays, and scale-up production.

Army Base Workshops (ABW) like ordnance factories are engineering fortresses assiduously built over the past 70 years. Their core competence is MRO. The greying workforce of ex-servicemen and civilians possess an expansive cache of skills and competencies to resuscitate nonfunctional and unreliable armaments, many years after OEMs have left the scene e.g. Bofors continue to blaze at the LC due to deep support (DS) by these bricoleurs. These specialists have also played a significant role in the development of Dhanush (desi Bofors).

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Shekatkar Committee had indeed recommended the corporatization of ABWs just like Ordnance factories. Corporatisation was supposed to facilitate the effort to bring in modern business practices into the ABWs; however, it has inexplicably been converted into a disruptive exercise to bring in private sector control of these strategic assets. With the uncertain situation at the borders, with an inventory that is a unique medley of technologies from Eastern and Western Europe, the US and the Far East, the Corporatisation initiative needs a rethink before the leap. The adversaries to the North and West have created impressive rebuild capabilities for all weapon platforms which are completely under its control. The Air Force and Navy also are retaining and modernising their integral engineering assets. Only the Army is trailblazing a new course—outsourcing readiness of complex systems to contractors!

To me, the Army`s GOCO (Government owned company operated) initiative shows signs of a fast-spreading systemic vulnerability in the organization, an organisational culture with a distinct absence of a systems view. A gross inability to recognise the connection between engineering & equipment readiness and teamwork.  It is also reflective of Chesterton`s fence –doing away of the fence without knowing why it was set up in the first place in the name of reforms. It is reported that the PLA  has been able to get deep insights into the adversary`s capabilities to conduct combat operations by studying maintenance engineering protocols of foreign forces like processes to address age, usage, and deployment effects and measured equipment capability.

It is time organic assets of the Government are analysed from the angle of not solely cost efficiency but also operational effectiveness. Such capabilities need to be classified as critical national infrastructure where Government`s hand remains on the tiller. Scaling up of capacities to provide the required surges in times of catastrophes and war could be done by partnering with the private sector. For a country of India size and potential, retaining important organic assets for a few decades more makes immense strategic sense. The Government will need these capabilities to provide succor to the needy in times of crisis and come out with all guns blazing at the LAC/LC if required… There are many other areas to be reformed in the meanwhile.

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Lt. Gen. (Dr.) N. B. Singh, PVSM, AVSM, VSM, ADC
Lt. Gen. (Dr.) N. B. Singh, PVSM, AVSM, VSM, ADC
Lt Gen N B Singh served as Director General of the Corps of Electronics and Mechanical Engineering (DGEME), Director General Information Systems (DGIS) and was a founding member of the Armed Forces Tribunal, Jabalpur. He specializes in armored fighting vehicles and played a key role in the design and development of bullet proof vehicle Takshak, Arjun Armored Recovery vehicle and made significant contribution in the development of the Dhanush gun system. He has undergone specialized training in Germany on off highway vehicles and served in Moscow as Military Attaché Technical.


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