By Arushi Sharma
The Ministry of Defence has allowed private firms to operate and manage Army Base Workshops located in eight cities, which include Delhi, Kolkata, Pune, and Bengaluru. For the first time in the defence sector, this change will unfold through the Government-owned, Contractor-operated (GOCO) model.
Explaining the GOCO model
Army Base Workshops (ABWs) ensure that the Indian Army remains operationally prepared and they do so by carrying out repairs and overhaul of weapons, vehicles, and equipment. With the GOCO partnership becoming functional, the private players would not have to invest in machinery, land, and other support systems as the government would make these readily available to them. This policy would allow each partner to perform its duties: the government would set mission areas and provide oversight while granting the required independence to the private contractors in implementing the missions using best practices.
Until now, the armed forces had been functioning directly under the Indian Army, with the Master General of Ordnance (MGO) responsible for taking care of the weapons and equipment while the Director General of Ordnance Services (DGOS) and other officers played an assisting role. The recently unveiled change comes as a major breakthrough since hitherto, not even the Ordnance Factories had been trusted with the ABWs.
The Ministry of Defence (MoD) had issued a directive to implement GOCO at ABWs in September, following which the workshops have been told to prepare their costing models so that the lowest bidders could be identified. According to internal communications and orders issued by the MoD and integrated headquarters, the model would become operational at ABWs and station workshops across six states.
Possible benefits of the new model
The decision to corporatize the ABWs was based on recommendations made by a committee of experts. Its aim is to increase the army’s combat capability and rebalance the government’s expenditure on the armed forces. The contractors would make use of the available facilities, manage all types of work as well as be responsible to get the required licenses, certifications, and accreditations to deliver the targets mutually agreed on with the government. Therefore, the idea is that each partner would do what it is best at.
The private sector would gain from the GOCO system by obtaining some big-ticket contracts. The defence industry would benefit as a whole because the contractors can execute the tasks efficiently and in a lesser time frame, surpassing bureaucratic restrictions. At the same time, the firms would not receive the contracts on a platter, having to constantly improve upon their competitiveness to win future contracts, and ultimately building a credible foundation.
Self-reliance in defence
One of the thrust areas for the government in the defence sector has been indigenisation of equipment and achieving self-reliance under ‘Make in India.’ Defence goods constitute a large portion of the country’s imported items and 78% of the MGO’s budget goes to Ordnance Factories. Thus, the role of public-private partnerships in the defence industry cannot be overlooked. Moreover, the procurement and maintenance of equipment through GOCO is likely to create investment opportunities of Rs 8000-9000 crore for private entities, according to a report by the Business Standard. In the light of the recently unveiled policy for ABWs, only one out of the eight workshops—the 515 ABW in Bengaluru—is responsible for indigenisation and manufacture of spares, while the rest are involved in repair and overhaul.
The defence privatisation discourse has also focused on the important role of the private sector as a system integrator, which was visualised in the Strategic Partnership model announced by the MoD in May 2017. However, despite several government initiatives, only a few top private players are presently involved in the defence sector and that too, in small-value contracts. Self-reliance in defence faces the risk of remaining a pipe dream if a long-term private investment is not encouraged. A key obstacle in realising this has been the long-standing trust issue between the MoD and the Indian private sector. Since GOCO would ensure that the contractors remain in compliance with quality standards and regulation, it has the potential of accelerating defence reform in the country by being instrumental in establishing a trust-based public-private relationship.
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