Why rush into privatising BEML, a CPSE that caters to the defence forces?



Shri Rajnath Singh

Union Defence Minister


Dear Shri Rajnath Singh,

Kindly refer to my earlier letter dated 3-2-2022 (https://countercurrents.org/2022/02/should-the-government-disinvest-beml-at-all-is-it-not-imprudent/) raising concerns against the proposed privatisation of Bharat Earth Movers Ltd. (BEML) which is a CPSE under the administrative oversight of your ministry and plays a crucial role in meeting the strategic requirements of the defence forces.

I have extracted below a paragraph from my earlier letter on the R&D investments made by the BEML and its efforts to indigenise technologies and products needed by the defence forces.

BEML has been at the forefront of the country’s self-reliance effort. It has been closely involved in the country’s indigenisation effort through R&D investments over decades of its existence, as for example, investing as much as Rs 133 crores on R&D during 2020-21 alone, which is about 3.73% of its sales turnover. Its R&D investments have yielded positive outcomes by way of acquisition of intellectual property rights and patents. BEML filed 55 IPRs during 2020-21 alone, which included 13 patents, 9 designs, 18 copyrights and 15 trademarks.The company has been awarded 8 patents so far. 69% of the sales turnover of BEML during 2020-21 was from in-house R&D developed products. During 2020-21 alone, BEML indigenised 107 items

I am not sure whether the Ministry of Finance/ DIPAM have taken your Ministry and the defence services into confidence while moving ahead at a breakneck speed to sell the CPSE to a private company, a proposal that will surely imply a serious setback to the country’s effort to attain self-reliance in the area of defence.

In my letter cited, I had explained how erroneous it is for the Ministry of Finance to justify BEML’s privatisation by saying that it would bring additional fiscal resources. To seek fiscal resources via the devious route of privatisation of a CPSE would be highly imprudent as the government could directly borrow on much more advantageous terms from the same pool of savings in the economy from which a private company would raise resources for buying that CPSE. Privatisation invariably forces the government to lose control over such a strategic CPSE like the BEML for a price several magnitudes lower than the social value of the CPSE.

To corroborate this view, we have the recent examples of two CPSEs, namely, the Central Electronics Ltd (CEL) and Pawan Hans, which were almost sold away for paltry sums but also sold to highly dubious firms who had no capacity to carry forward the operations of those two CPSEs. Apparently, DIPAM which is directly responsible for not exercising due diligence in the matter, to the embarrassment of the government, has either not learnt any lessons from this or has deliberately chosen to go ahead with the privatisation of the BEML, unmindful of the strategic nature of the CPSE’s activities and determined to sell it to yet another nondescript private company of questionable antecedents, incapable of managing the BEML in a way that would serve the national interest. Apparently, DIPAM is blissfully unaware of the kind of sensitive work that the BEML is doing!

I have come across a news report in the public domain (https://idrw.org/beml-seeks-partners-to-develop-aatv-for-the-indian-army/) which indicates that BEML has issued an Expression of Interest (EOI) for 18 articulated all-terrain vehicles (AATV) suitable for operations ‘over varied terrain like snow, desert, and slush’ at altitudes up to 18,000ft. The Indian Army will operate them in both mountainous and marshy areas. Out of these, 12 AATVs are required to be delivered for the Ladakh area.

If the BEML were to be sold to a private company, which is readily accessible to foreign direct investment, one should not be surprised if its activities, which have hitherto been of such a sensitive nature, come to be subject to snooping by foreign agencies. I hope that the Defence Ministry has considered this possibility.

Under these circumstances, I would caution your Ministry not to risk handing over the BEML to a private company, as proposed by DIPAM. I suggest for your consideration that you may also apprise the Union Cabinet of the far reaching implications of privatising the BEML and advise them not to go ahead with the proposal.


Yours sincerely,

E A S Sarma

Former Secretary to Govt of India

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