Defence public company profits see significant drop

Defence public company profits see significant drop

The profits of four major defence public sector (DPSU) units manufacturing nuclear-powered submarines, warships, armoured cars and strategic electronics have gone down significantly in the last one year notwithstanding Defence Minister A K Antony’s increasing thrust on indigenous defence industry.

The industrial houses with sliding profits are Bharat Electronics Ltd (BEL) and Bharat Earth Movers Ltd (BEML), both in Bangalore; Goa Shipyard Ltd (GSL) and Hindustan Shipyard Ltd (HSL) in Visakhapatnam, which is making indigenous nuclear submarine “INS Arihant”.

HSL is the biggest loser. From posting a profit of Rs 55 crore in 2010-11, it incurred a loss of Rs 85.98 crore in 2011-12, as per the data released by the defence ministry in its annual report.

No explanation was given for such a big drop in its books. Scam-tainted BEML, which is under scanner for Tatra truck controversy is on a continuous slide for the last two years.

The Bangalore based DPSU registered a profit of Rs 222.85 crore after tax deduction in 2009-10, which dipped to Rs 149.76 crore in 2010-11 and further nosedived to a mere Rs 57.25 crore in 2011-12.

The annual report, once again, is silent on why a mini-Ratna company’s profit reduced by 74 per cent within two years.

The profits of Goa Shipyard Ltd – the youngest and the smallest defence shipyard that was accorded a mini-ratna status in 2007 – decreased by almost Rs 100 crore within one year as its profit came down to Rs 82.8 crore in 2011-12 from Rs 176.13 crore in 2010-11.

In the same period, the profits of BEL reduced by almost Rs 30 crore. Kolkata-based Garden Reach Shipbuilders and Engineers Ltd too suffered a marginal loss.
Profit margins

Profit margins of all of the nine defence PSUs barring BEML went up between 2009-10 and 2010-11. The jump was substantial for BEL, GSL and HSL, according to defence ministry’s last year’s annual report.

New hopes

Despite the not-so-good track records, Defence Minister A K Antony is pinning his hope on Indian defence industries – dominated by these PSUs so far – in order to reduce India’s dependence on foreign suppliers. The defence procurement procedure is being modified in favour of domestic industries following the VVIP chopper scam.

In the absence of major private participation, the defence PSUs and ordnance factories are the top line manufacturers of military items for the armed forces.

Over the next five years, the defence ministry plans to invest Rs 15,000 crore to modernise the infrastructure at ordnance factories including capacity augmentation for production of T-90 tanks and T-72 tanks as well as armoured vehicles and establishing a new facility to produce 155 mm howitzers.

In the 11th plan only Rs 583 crore was spent on modernising the ordnance factory board units.