Indian Defence

Privatisation Of Defence Sector: Pros & Cons

With the new idea of Atmanirbhar Bharat, the role of private players in the defence sectors have increased by many folds. In Today’s article, we are going to discuss the various aspects of privatisation. We will look at the various benefits of privatisation. We will also try to understand its demerits. We would also discuss that is the step taken by India towards privatisation of defence sector is beneficial or not.

Advantages Of Privatisation Of Defence Sector


The Public Sector Undertakings (PSU) in the defence sector in India does not hold a very good record in terms of efficiency. The Ordinance factory boards are often accused of being very inefficient. Hindustan Aeronautics Limited has a notorious record in delivering the orders timely. Despite having such a large and skilled workforce, the PSUs are not able to meet the requirements of the armed forces.

So what are the reasons behind this scenario? Poor management could be one reason. The management of these PSUs is not able to utilise the available resources to the optimum level. Within the country, we have an excellent example that can be a role model for the other PSUs. It’s non-other than the Indian Space Research Organisation (ISRO). ISRO has remarkable efficiency. ISRO always utilizes every ounce of the available resource. Besides that ISRO has a very high success rate and never misses its schedule. One of the key reasons behind ISRO’s phenomenal success is its effective management.

Another reason behind the poor efficiency of PSUs could be corruption. The audit must be carried out carefully and the vigilance agencies should be very strict in this regard. No compromise can be made in the defence sector since it is directly involved in national security and integrity.

How does privatisation of defence sector improve the situation? In a country like India, private players have to offer superb efficiency and on-time delivery in order to establish themselves in the market. In earlier times, right from the independence government was very hesitant to allow private players into the defence sector, mostly due to security concerns. But now policies are going through rapid changes. In today,s contemporary world privatisation of defence sector is a necessity.

Private companies have to be profit-oriented in order to survive in the market. Maintaining proper efficiency is very essential for reaping huge profits. most of the private players present in India’s defence sector today have a very good track record in terms of efficiency. For example, Larsen & Tubro has almost delivered the 100 K9 howitzers on time.

Also Read, Will Corporatization Ruin The OFB’s Future?

Competitive Pricing And End Of Monopoly

The PSUs earlier used to have a monopoly in the defence sector. For instance the Ordnance Factory Board even today has a monopoly in the Indian Civilian arms market. The rate at which OFB offers small arms to civilians in not at all justified. Despite paying huge sums of money, a customer often receives a gun from OFB that gets jammed while firing its very first shot!

In the countries which are way ahead in terms of defence production ecosystem than India such as the United States of America, there are multiple companies producing the same equipment. If we talk about defence aerospace industries, there are multiple players such as Boeing, Lockheed Martin, Northrop Grumman, General Dynamics, McDonnell Douglas, etc. Similarly, in the small arms sector, there are numerous companies such as Sig Sauer, Colt, Smith & Wesson, Remington, Springfield Armory, and many more. So whenever the government launches a tender, there are always multiple companies to answer it, thus ensuring competitive pricing.

Research & Development And Innovation

Research and development play a crucial role in the survival of private players in the market. They have to constantly innovate in order to stay relevant to rapidly changing requirements. Private firms don’t have to wait for the government’s approval of the fund to start the research and development of any particular project. This is not the case with the PSUs. The government’s approval of funds always leads to long delays. Sometimes a project has to wait so long in the pipeline that it loses its relevance.

Today a majority of leading defence equipment manufacturers are private. There are a few exceptional state-owned manufacturers which have the cutting edge technology.


In order to remain in the competition, private companies have to maintain their quality standards. In India, OFBs is accused of producing the faulty and poor quality of ammunition. Despite receiving numerous complaints OFB has done nothing to improve the condition. Still, the army is forced to buy ammunition from OFB since it does not has any other option. Whenever there is more than one seller, the quality factors along with pricing become very important.

Export Opportunities

Whenever there is a manufacturing ecosystem capable of surplus production, the doors to the global market beyond the domestic market open. Having multiple companies producing the same defence equipment will give India the opportunity to export them in the global market. This would produce more revenue for the companies ensuring their growth. Increased exports would establish India as a major military power in the world with whom all the countries would be willing to keep strong defence ties.

Disadvantages Of Privatisation Of Defence Sector


For a very long time, the Indian government was reluctant to privatize the defence sector. This was primarily due to security concerns. It is very difficult to protect sensitive data when it goes to a private company. There are many examples where private defence companies compromised sensitive information just for money. In India, the government is planning to transfer various technologies developed by DRDO to private players to ensure a faster and cost-effective production. However, the danger of the sensitive data ending up in the wrong hands could not be neglected. Private companies along with the state-owned companies are vulnerable to cyber attacks as well.

Reduced Control

When a private company manufactures a certain defence product, it will remain in control of a country as long as it produces that particular product on that country’s soil. There is a possibility that the private companies in the Indian defence sector might cease operations in India and migrate to some other country. From there it could sell weapons to some customers which may not be in India’s national interest. As long as the companies remain ethical, there is no problem but as soon as they start compromising their ethics for greater profit, they become a national threat.

Also Read, Is Canceling The 4 Billion Dollar Deals, Hitting 2 Birds With Single Stone By Modi Government?

Lobbyists To Promote Arms Sale

Private companies often hire lobbyists to promote arms sale. let us understand it by an example. Ever wondered why the USA is always in a war? One reason is that it has established itself as a global superpower but things are not always like what it seems to be. The defence manufacturing giants in the US like General Dynamics, Lockheed Martin, Colt, Heckler and Koch US, have their own lobbyist in the senate of the US government. They promote America’s participation in various conflict to ensure their arms sale. After a defence ecosystem comprising of private firms develops in India, it will not be surprising to have a similar scenario here.


The privatisation of defence sector is the need of the hour. It comes with its own set of benefits and risks. It should be carried out very carefully. Privatisation of the defence sector should not mean the removal of State-owned companies. Privatisation should be carried out up to that extent only where the State-owned companies would have a fair competition. The most sensitive technologies should never be transferred to any private firm, such as the missile technology. Private companies should be monitored very strictly. As long as the private companies remain ethical and work in the national interest, the defence sector of India will bloom. With the joint efforts of private and public companies, India will become Atmanirbhar. The day is not very far when all defence equipment will be indigenously manufactured and there will be zero imports. Privatisation of the defence sector is the first step toward realizing the dream of Atmanirbhar and Sashakt Bharat.



Sheershoo Deb

I am a defense aspirant preparing to be an officer in the prestigious Indian armed forces. Earning the prestigious blue uniform is my dream.

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