Procurement: India Militarizes Privatization

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December 22, 2016: India is eliminating the monopoly the state owned Ordnance Factories Board (OFB) has long had for producing ammunition. This change has been long sought. There are several sound reasons for the change. Civilian firms have long demonstrated that the ammo can be made cheaper, of higher quality and faster if state owned manufacturing is not involved.

The OFB began in 1775 as the British East India Company (which colonized, unified and industrialized India) sought to create a local source of gunpowder and other munitions while also controlling who had access to it. When British India became independent in 1947 it inherited the OFB, along with a nationwide bureaucracy, a common language (English) for government and commerce and a preference for socialism (in the form of state controlled monopolies). Britain got rid of its state owned firms in the 1980s and India, for much the same reasons, followed suit in the 1990s. But there was one major difference in India and that was the long established use of government jobs as a form of patronage (to help get elected). This exists in many other democracies but India had a particularly nasty addiction to this sort of thing. Thus Indian primary education is still a shambles (because teaching jobs often go to incompetent or non-existent people) and state owned defense industries were perpetually overstaffed and inefficient.

But maintaining a credible military in the face of threats from China and, to a lesser extent, Pakistan (and its nukes) means the largest (in terms of population) nation on the planet will never be self-sufficient in ammunition manufacturing unless it allows privately owned Indian firms to participate. The elimination of the OFB monopoly means politicians will lose control over more than 100,000 jobs. But the other 99.99 percent of Indians will benefit from a more effective national defense plus opportunities for more jobs. The private ammo manufacturers can export, which state owned firms have been ineffective at. The private industry offers fewer, but better quality (in terms of pay, skills and opportunities) jobs. It has not gone unnoticed that India has fallen behind China in defense matters largely because China allows private firms to design, manufacture and sell military equipment to the Chinese military and a growing list of export customers.

Initial needs are mostly for Russian designed ammo (unguided rockets, 125mm tank shells, 23mm and 30mm autocannon shells) as well as a growing number of Western designs (40mm grenades and 155mm artillery shells). The government allows Indian firms to make deals with foreign manufacturers in order to obtain needed design and manufacturing technology. Indian firms have already been doing this increasing since the 1990s for non-military items and that has led to Indian innovations and efficiency conspicuously absent in state owned firms.

 


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