AS soon as the Modi-led BJP government assumed power at the Centre in 2014, one of its early and systematic moves was to initiate the privatisation of the defence sector.

A significant starting point was the imposition of excise duty on products manufactured by Ordnance Factories and Defence Production State Units (DPSUs). Historically, these units were exempt from such duties, as both the producer and consumer in these transactions was the Ministry of Defence (MoD), and the payments did not result in any actual revenue generation for the government. However, the new government argued that, to attract private entrepreneurs into the defence manufacturing sector, it was essential to establish a “level playing field” in all aspects.

The first major policy change came in the form of Reframing Defence Procurement and Acquisition Policy, with the stated aim of encouraging private sector participation in production, MRO (Maintenance, Repair and Overhaul), R&D, and other areas.

This was followed by introduction of three categories, namely:

Buy (Indian) and Buy & Make (Indian)

Buy (Global – Manufactured in India)

Buy (Global – Direct Foreign Purchase)

To further facilitate privatisation, the government simplified the processes of trials and testing. Definitions of key standards like ‘quality’ and ‘performance’ were redefined under terms such as GSQR (General Staff Qualitative Requirements) and JSQR (Joint Services Qualitative Requirements), easing private entry into previously restricted segments.

Simultaneously, restrictions were imposed on Ordnance Factories, limiting their operations to core manufacturing in the production, that could not ordinarily be performed by the private sector – thereby narrowing their scope and paving the way for private enterprises to occupy the vacated space.

Several other major steps followed through amendments to the Defence Procurement Procedure (DPP) and the Defence Acquisition Procedure (DAP). Among the most significant changes was the introduction of the Strategic Partnership Model (SPM). This model aimed to build indigenous capability in specific areas of defence acquisition while incorporating provisions of offset percentage, which required a certain percentage of value addition to be carried out within India.

The stated objectives of the Strategic Partnership Model included: achieving self-reliance in defence manufacturing; enhancing transparency and efficiency in acquisition processes; promoting ease of doing business and simplifying rules to attract both foreign and domestic private sector players. The chosen sectors under this model were: submarines, fighter aircraft; helicopters; and armoured Fighting Vehicles.

The introduction of the Strategic Partnership Model marked a significant shift in India’s defence production ecosystem, moving towards a more privatised, corporate-led framework.

However, these developments have not gone unchallenged. Stakeholders, particularly the All India Defence Employees Federation (AIDEF), have raised serious concerns about the implications of this aggressive privatisation agenda. They argue that such moves could:

Undermine and jeopardise the contributions and innovative capacity of PSUs, DRDO, and Ordnance Factories

Increase foreign influence through FDI, driven primarily by profit motives, which may lead to serious crisis at any point of time

Result in high costs due to failed initiatives if any

Lead to a loss of State control over critical defence infrastructure

Encourage corruption and crony capitalism

Create risks of leakage of sensitive and strategic information

The government's continued push towards privatisation in the defence sector, despite strong opposition from public sector unions and strategic experts, has thus put a question mark over the long-term security, and autonomy of India’s defence production landscape.