Defence PSUs and Ordnance Factories

The role of government-owned defence firms like HAL and BEL, why the ordnance factories were corporatised, and debates about efficiency.

Much of India’s defence manufacturing has been done by government-owned companies.

Defence PSUs

Hindustan Aeronautics Limited (HAL): aircraft and helicopters, including Tejas.
Bharat Electronics Limited (BEL): radars and electronics.
Bharat Dynamics: missiles.
Mazagon Dock, Garden Reach and Cochin Shipyard: warships.
BEML: heavy vehicles.

Ordnance factories

India’s 41 ordnance factories, which made ammunition, weapons and vehicles, were run as a government department. In 2021, they were corporatised into seven government companies.

Why corporatise

Accountability for costs and delivery.
Autonomy to take orders beyond the government.
Efficiency and competitiveness.

Criticisms of PSUs

Delays in delivery.
Guaranteed orders that reduced pressure to perform.
Limited innovation.

Strengths

Skills and infrastructure built over decades.
Many defence PSUs became profitable, and their share prices rose strongly in recent years with rising orders.

The new corporation

A former ordnance factory, now part of a corporatised company, bids for export orders for ammunition, something it couldn't easily do as a government department.

Thinking PSUs are always inefficient

Many defence PSUs have become profitable, though delays remain a concern.

Key takeaways

Defence PSUs like HAL and BEL dominate Indian defence manufacturing.
Ordnance factories were corporatised into seven companies in 2021.
Corporatisation aims for accountability and efficiency.
PSUs face criticism for delays but many are profitable.