Privatization and Disinvestment : News & Discussions

Ashwin

Agent_47
Staff member
Administrator
Nov 30, 2017
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Bangalore
People gunning for OFB don't realize that the privatization of OFB is going to be a disaster.

OFB is a massive entity, from gun carriages to Tanks to parachutes to tents, OFB makes everything with almost complete monopoly. OFB is also sitting on massive cash reserve among it's 41 group companies.

When you remove a malignant tumor from the body, it doesn't solve cancer. If anyone buys OFB, they will do so for the cash reserves and it's orderbook, if the markets are opened and OFB treated on level playing field it will be finished like BSNL.

It needs a MUL type of disinvestment and hands over the management for private players, or to hire really high quality empowered management from the international markets to revamp the industry.

Also due to the huge cash reserve some of the PSU's sit on, their operating cost is almost nothing. If the intent is right, pretty good things can be done to the OFB group companies.
Here is another idea. Split it into two!.

Then disinvest equally. So that the board can have all the power to fire and hire, utilize the land, invest in R&D as they wish. Creative destruction will decide the winners. One of them will return multiple in share value for the government compared to now.
 

Milspec

सर्वदा शक्तिशाली; सर्वत्र विजय
Moderator
Dec 2, 2017
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Here is another idea. Split it into two!.

Then disinvest equally. So that the board can have all the power to fire and hire, utilize the land, invest in R&D as they wish. Creative destruction will decide the winners. One of them will return multiple in share value for the government compared to now.

It's a folly to view OFB as a single unit to begin with. Look at it as a conglomerate of companies.
The broad classification is
  • Ammunition and Explosives (A&E)
  • Weapons, Vehicles & Equipment (WV&E)
  • Materials and Components (M&C)
  • Armoured Vehicles (AV)
  • Ordnance Equipment Group of Factories (OEF)
Each of them has their unique challenges, their revenue streams are different, and finally their product management are vastly different.

A HVF unit will manufacture T90's and BMP's while an Ammunition and Explosives unit will face external pressure from direct imports. A materials and components factory will work on loss on making one-off product line like drop tanks, or solenoids which has a market of 100- 200 units but will undertake without a business case.

We have to come to terms with the fact that there is no quick fix situation. OFB is not government EPC company that L&T can easily absorb, or a metal manufacturer that Tata's can fix and run. This is a large conglomerate with no single entity in India that works in that discipline.

There is always the option to break it into smaller entities and then find corporate partners, but then it loses its heft, dilutes its books. Maybe that is the way to go, but I would still much rather have a Maruti situation.
 

Nikhil

nik141993
Dec 1, 2017
503
293
India
People gunning for OFB don't realize that the privatization of OFB is going to be a disaster.

OFB is a massive entity, from gun carriages to Tanks to parachutes to tents, OFB makes everything with almost complete monopoly. OFB is also sitting on massive cash reserve among it's 41 group companies.

When you remove a malignant tumor from the body, it doesn't solve cancer. If anyone buys OFB, they will do so for the cash reserves and it's orderbook, if the markets are opened and OFB treated on level playing field it will be finished like BSNL.

It needs a MUL type of disinvestment and hands over the management for private players, or to hire really high quality empowered management from the international markets to revamp the industry.

Also due to the huge cash reserve some of the PSU's sit on, their operating cost is almost nothing. If the intent is right, pretty good things can be done to the OFB group companies.
We all know why they want to privatise & who benefit from it......Defence , energy strategic ,food , health sectors.. should never be privatise. It's a recipe for disaster.
 

Ankit Kumar

Team StratFront
Nov 30, 2017
3,816
3,679
Bangalore
For a start even if OFB is not privatised, the Government should in true essence ensure that level playing field is provided to private sector in all of Armed Forces procurement and untill a project of strategic importance, government should refrain from giving a free pass to any DPSU. (Shipbuilding needs to be nurtured so excluding shipbuilding).

Maybe for a start, if a private entity can supply ARs cheaper than AK203 project with OFB, then try them out.
 
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Nikhil

nik141993
Dec 1, 2017
503
293
India
For a start even if OFB is not privatised, the Government should in true essence ensure that level playing field is provided to private sector in all of Armed Forces procurement and untill a project of strategic importance, government should refrain from giving a free pass to any DPSU. (Shipbuilding needs to be nurtured so excluding shipbuilding).

Maybe for a start, if a private entity can supply ARs cheaper than AK203 project with OFB, then try them out.
What level playing field you are talking about ? Giving contract to L&T , Adani, Tata, reliance is not level playing field its called crony capitalism & Indian pvt sector is a big joke by the way. Tell me one thing these jokers have build till date on there own. They have become a money laundering & corruption hot bed. Russians & Chinese are all building world class weapons without any involvement of backing of pvt sector...even all Indian weapons from missile to armament is being built by govt entities... so where does this pvt sector come in picture?.
 

Ankit Kumar

Team StratFront
Nov 30, 2017
3,816
3,679
Bangalore
What level playing field you are talking about ? Giving contract to Adani, Tata, reliance is not level playing field its called crony capitalism & Indian pvt sector is a big joke by the way. Tell me one thing these jokers have build till date on there own. They have become a money laundering & corruption hot bed. Russians & Chinese are all building world class weapons without any involvement of backing of pvt sector...even all Indian weapons from missile to armament is being built by govt entities... so where does this pvt sector come in picture?.
By level playing field, I simply mean stop nominating DPSUs. That's all. If a private entity qualifying to receive a RFP from armed forces, then no DPSU should have the right to ask Government to create hurdles.

Russia and China work in a different way. If we are to work their way, we will need to give up our democracy. Not that I am for or against it... It's just that under the present circumstances, trying to work as USA is more likely to yield results.
 

Nikhil

nik141993
Dec 1, 2017
503
293
India
By level playing field, I simply mean stop nominating DPSUs. That's all. If a private entity qualifying to receive a RFP from armed forces, then no DPSU should have the right to ask Government to create hurdles.

Russia and China work in a different way. If we are to work their way, we will need to give up our democracy. Not that I am for or against it... It's just that under the present circumstances, trying to work as USA is more likely to yield results.
Why should taxpayers or public money go to some pvt entity whose R&D is zero & just a front for western MNC to get a foothold in country through compromised military,political elements... wanting another EIC in India....So shareholders and certain people benefit instead of state.
why do you think they hate Russia so much for that matter any country with state enterprise. Russian resurgence under Putin is a slap on whole NATO & west showing how a strong govt.... backing state institutions function & can deliver under all odds.... despite all western pressure tactics, Russia has almost catched up with west in most military related technological areas..... Just look at the military radars, fighting vehicles etc. they are building now days.
Forget technology... Kremlin rigged whole US election so that pedo orangutan become US president....goes on to show how vulnerable US is. The way things are going we may probably see a Soviet Union 2.0 in our life time once again.

. Russia and China work in a different way. If we are to work their way, we will need to give up our democracy. Not that I am for or against it... It's just that under the present circumstances, trying to work as USA is more likely to yield results.
Only thing different about them are that they don't allow western scammers to compromise & run there industry.
 

Nikhil

nik141993
Dec 1, 2017
503
293
India
Well we have tried till now the way you are suggesting and we are no where close to producing even a 9mm replacement of pre WW2 era pistol. Forget everything else.

If you truly believe what you write, I have nothing to say.
You were nowhere close to launching a sounding rocket until a govt institution build you one. Where was pvt sector than ? Laundering money of corrupt elite political & business class to Europe i guess. You were nowhere close to launching a sattlite into space once. Now you shoot them. How many countries does that ? Thanks all to govt & state institutions.
 

Ankit Kumar

Team StratFront
Nov 30, 2017
3,816
3,679
Bangalore
You were nowhere close to launching a sounding rocket until a govt institution build you one. Where was pvt sector than ? Laundering money of corrupt elite political & business class to Europe i guess. You were nowhere close to launching a sattlite into space once. Now you shoot them. How many countries does that ? Thanks all to govt & state institutions.
Space exploration programs all around the world have grown in a similar way. Only now with enough proliferation of technology Pvt players are coming.

Cannot be a precedent for other industries.
 

Milspec

सर्वदा शक्तिशाली; सर्वत्र विजय
Moderator
Dec 2, 2017
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We all know why they want to privatise & who benefit from it......Defence , energy strategic ,food , health sectors.. should never be privatise. It's a recipe for disaster.
I am all for disinvestment, but the right PSU's need to disinvested. The government should govern, It should create a conducive environment for businesses to run not run businesses.
 

Ankit Kumar

Team StratFront
Nov 30, 2017
3,816
3,679
Bangalore
Deadline for bids for AI might have been extended to August 31, but except TATA still no other major player has shown interest. Government has cleared a way so as to allow NRIs also to buy up 100% of AI, but chances are bleak.

BPCL sale however should be a successful one.
 

Ankit Kumar

Team StratFront
Nov 30, 2017
3,816
3,679
Bangalore
Last date for EOI for Air India disinvestment has been again moved forward to October now.

Apparently there is 1 more party in addition to Tata intersted in it.

PS: Mota bhai Ambani to nahi wo unknown intersted party ?

BTW Spice Jet had earlier shown interst to acquire the regional arm of Air India, but nothing concrete on that yet.
 

Ashwin

Agent_47
Staff member
Administrator
Nov 30, 2017
5,225
8,628
Bangalore
It's a folly to view OFB as a single unit to begin with. Look at it as a conglomerate of companies.
The broad classification is
  • Ammunition and Explosives (A&E)
  • Weapons, Vehicles & Equipment (WV&E)
  • Materials and Components (M&C)
  • Armoured Vehicles (AV)
  • Ordnance Equipment Group of Factories (OEF)
Each of them has their unique challenges, their revenue streams are different, and finally their product management are vastly different.

A HVF unit will manufacture T90's and BMP's while an Ammunition and Explosives unit will face external pressure from direct imports. A materials and components factory will work on loss on making one-off product line like drop tanks, or solenoids which has a market of 100- 200 units but will undertake without a business case.

We have to come to terms with the fact that there is no quick fix situation. OFB is not government EPC company that L&T can easily absorb, or a metal manufacturer that Tata's can fix and run. This is a large conglomerate with no single entity in India that works in that discipline.

There is always the option to break it into smaller entities and then find corporate partners, but then it loses its heft, dilutes its books. Maybe that is the way to go, but I would still much rather have a Maruti situation.
OFB-Oct12-2_Mos-x809.jpg



Looks like they are splitting them into segments specializing in distinct areas, like weapons, ammunition, and combat vehicles.

The MoD also says that the OFB monopoly, where it supplies products to a captive customer, the armed forces, brings its own set of problems. The main consequence of this monopoly is that there is no incentive for the OFB to improve quality. This also results in high overhead charges being loaded onto OFB products, with minimal innovation and technology development taking place. There are also issues of low productivity, further compounded by the fact that there is no penalty for delayed delivery to customers.
 
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Milspec

सर्वदा शक्तिशाली; सर्वत्र विजय
Moderator
Dec 2, 2017
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OFB-Oct12-2_Mos-x809.jpg



Looks like they are splitting them into segments specializing in distinct areas, like weapons, ammunition, and combat vehicles.
If done by the same finesse that this government has shown in the other areas, there is a significant probability that it will run most of the OFB to the ground.
 
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