Cabinet Approves Move To Privatise India’s Largest Defence Manufacturer
May 1st, 2017
In October 2016, it was announced that the Cabinet was considering a plan to sell 26% of the shares of Bharat Earth Movers Limited (BEML) to the private sector.
It was finally announced in January 2017 that the Cabinet had green-lighted the plan, allowing for a majority of BEML’s shares to be owned by the private sector.
The government’s approval to sell 26% of the shares of India’s leading defence equipment manufacturer to the private sector leaves only 28% of the company’s shares with the government. Therefore, it will mark the first time in Indian history that the Ministry of Defence will lose control over one of its own companies.
The government has also announced that similar strides will be made with ten other public sector companies. It says this is to increase profits, efficiency and to meet its deficit goal. However, critics have said that this is an effort of the government to allow back-door entry to corporations in the defence sector. The move has also triggered protests by BEML employees.
BEML is a public sector undertaking (PSU), and one of India’s nine Defence PSUs. It is India’s leading defence equipment manufacturer; it keeps the Indian Army and other defence forces abreast with state-of-the-art military equipment.
BEML was established in May 1964 as a PSU for the manufacture of rail coaches and spare parts and mining equipment. Presently, the Government of India owns 54% of total equity and rest 46% is held by public, financial Institutions, foreign institutional investors, banks, and employees.
BEML operates on three major business verticals for associated equipment manufacturing:
- Mining & Construction
- Rail & Metro
The company is India’s leading manufacturer of defence equipment.
The government recently approved the move to reduce its shareholding from 54.03% to 28.03% – a decrease of 26%.
The Logical Indian approached 10 senior officials and workers who either are employed at BEML or were working for BEML. Most of them refused to talk to us, unwilling or divulge information or opinions. However, one of them agreed to discuss the issue. This individual is currently working for BEML; he requested to remain anonymous.
He said, “The process of strategic sale of 26%of BEML share is under process; the tender yet to be floated by a third party. It is essentially a bidding process, and the shares will go to the highest bidder. While there is concern that this will have negative effects on the employees, there is also concern because some portion of BEML’s defence production activity will soon be under the control of a private company.”
BEML began with a capital investment of Rs 5 crore in 1964 and has achieved a turnover of nearly Rs 3,500 crore in the present times. In fact, BEML has been one of the most profitably PSUs of India – therefore, this is not a case of the government selling a loss-incurring PSU.
The government aims to collect Rs 56,500 crore from sales of stakes in public sector companies. Similar attempts in the past have been hindered by labour union protests and volatile financial markets.
BEML is reportedly the first of the casualties. The government has also announced that similar strides will be made with ten other public sector companies. According to Livemint, other companies on the block include Hindustan News Print Ltd., Ferro Scrap Nigam Ltd., Pawan Hans Helicopters Ltd., Project & Development India Ltd., Bharat Pumps & Compressors Ltd., Central Electronics Ltd., Bridge and Roof Company India Ltd. and Hindustan Prefab Ltd.
BEML employees are up in arms
The BEML Employees’ Association in Mysuru decried the government’s move to privatise BEML. They held several demonstrations in January and February, declaring ‘Save BEML, Save Nation’.
The protesters said that they have submitted request letter to the Prime Minister and President. But no action has been taken. The protesters will not stop protesting until the government decides not to privatise BEML.
While most of the protests took place in Bengaluru, where the BEML headquarters is located, many took place in other regional offices. BEML’s 500-odd employees at its unit in Palakkad, Kerala actively took part in the convention, which decided to ensure a broad-based unity at the national-level among workers against the disinvestment drive (more here).
The BEML employee The Logical Indian spoke to echoed his colleagues’ sentiments. “The entire BEML team is unhappy with this sale. We have called for a strike on 25 May 2017. We have held several protest marches in the past months; we will continue to protest until the government reverses its decision.”
The Logical Indian take
(The detailed opinion piece can be read here.)
The Government of India has been committed to expanding the scope of its indigenous arms industry. It wants to decrease exports, built its reputation as a self-sufficient arms manufacturer, and use the profits in other sectors like infrastructure and education.
However, selling most of its stakes in defence manufacturing companies is not the way to go about this. For the complex between defence manufacturers and the political and military establishment, conflicts are a routine fact of life. It lobbies the government to spend hundreds of billions of dollars every year, and it feasts on these riches – while the world suffers in a state of perpetual war and suffering. And almost nothing is ever done about it.
Allowing the private sector to control the defence sector has altered political dynamics around the world – but particularly in the West. It has led to the rise of corporate cronyism, allowing unelected, rich business tycoons to have an unwarranted say in the foreign policy of a nation. In too many cases, these corporate leaders have too much say in deciding which country their government would wage a war against, which country to issue sanctions against, which country to sell weapons to.
We know this is a bad idea, we know it has resulted into disastrous consequences. However, instead of learning from history, instead of learning from other countries’ mistakes, why are we repeating their mistakes?