Ordnance Factory Board corporate makeover – the plan and its impact on arms production in India
New Delhi: In a sweeping defense reform on Wednesday, the Union Cabinet approved the transformation of the Ordnance Factory Board (OFB) into a corporation, a plan that was first discussed two decades ago to streamline operations of the 41 munitions factories across the country.
The corporatization of munitions factories – which have become synonymous with shoddy products, delayed lead times and lack of technological advancements – will see these 41 factories subsumed as seven 100% government-owned entities, registered under the Companies Act 2013.
Ammunition factories are the oldest and largest organization in the country’s defense industry with a history dating back to 1787, when a gunpowder factory was established in Ishapore by the British. The Ishapore factory began production in 1791.
Based in Kolkata, OFB is a conglomerate of 41 factories, nine training institutes, three regional marketing centers and five regional safety controllers. At present, these factories are divided into five clusters or operational groups and they produce a range of weapons, ammunition, armored and infantry fighting vehicles, clothing and the like such as parachutes for services.
The OFB, which has a total staff of approximately 81,500, is under the administrative control of the Department of Defense Production of the Ministry of Defense.
The government has now approved the corporatization of OFB, which will give the organization autonomy and remove it from the direct control of the Department of Defense Production.
The three recognized federations of workers in military equipment factories, affiliated with the RSS, the Left and the Congress, have, however, opposed to movement and threatened to set off a commotion.
However, the government has decided to end corporatization by the end of this year.
To implement its decisions on the move, the government decided to delegate the authority of the Cabinet to an Empowered Group of Ministers (EGoM), formed under the leadership of Defense Minister Rajnath Singh.
The other members of EGoM are Interior Minister Amit Shah, Finance Minister Nirmala Sitharaman and Minister of Labor and Employment Santosh Gangwar.
Global consultancy firm KPMG has been selected for the corporatization movement.
Read also : Expert group to refine military dramatization plan after stakeholders differ on key issues
The plan ahead
Cabinet Committee on Security had in July last year approved convert OFB into one or more 100 percent state-owned entities registered under the Companies Act 2013.
In less than a year, the Union Cabinet approved it. Government sources said the restructuring was aimed at turning munitions factories into productive and profitable assets, deepening specialization in the product line, strengthening competitiveness in addition to improving quality and profitability.
Under the plan, the 41 factories would be subsumed into seven corporate entities that are 100 percent government-owned and professionally managed.
These will be like other state-owned defense public sector companies like Hindustan Aeronautics Limited and Bharat Dynamics Limited (BDL) among others.
Under the seven entities, there will be an Ammunition and Explosives Group, which would be primarily engaged in the production of ammunition of various calibers and explosives with enormous potential for exponential growth, not only through manufacturing in India, but also by manufacturing for the world. .
the Vehicles Group would mainly engage in the production of defense, mobility and combat equipment vehicles such as tanks, trawls, armored personnel carriers and mine-protected vehicles. It is expected to increase its share in the domestic market through better utilization of capacity and also to explore new export markets.
The Weapons and Equipment group would be primarily engaged in the production of small arms, medium and large caliber guns and other weapon systems. It is also expected to increase its share of the domestic market by meeting domestic demand as well as by diversifying its products.
In addition, the Troop Comfort Items group, the Ancillary group, the Opto-Electronics group and the Parachute group constitute the entire structure.
Read also : Joint Military Command is the future, but India cannot rush to it
Why corporatization is necessary
Over the past two decades, several high-level committees – such as the TKA Nair committee in 2000, the Vijay Kelkar committee of 2006, Vice-Admiral Raman Puri’s committee in 2016, and Lieutenant General DB Shekatkar’s committee in 2016 – called for the establishment of munitions factories. transformed from a government department into a legal person.
As mentioned earlier, OFB had become synonymous with poor quality products, delayed deadlines and lack of technological advancement.
The production cost is also too high because the production value per employee is very low.
For this reason, despite the price of OFB products without imputing any profit on the cost of production (because profiting from supplies to the armed forces is prohibited), the military complains that the cost is simply too high.
In addition to the armed forces, which have been complaining for years, the Comptroller and Auditor General of India (CAG) has in multiple reports critical the ministry for its mode of operation.
A CAG report in 2018 mentionned that a large number of production orders given to the OFB remained pending in March of the same year. The oldest of these production orders dated from 2009-2010.
The latest example of OFB non-delivery to the armed forces within a fixed timeframe is that of Dhanush guns.
As of April 2019, when the induction of Dhanush guns began, only 12 of the locally built long-range artillery guns have been delivered from now on. That’s well below the 18 guns needed to make a full regiment.
This development comes at a time when the armed forces are involved in a conflict with China in Ladakh and have been look for more artillery guns to “fill the operational gaps in the medium artillery in HAA (high altitude zone) along the northern borders”.
Late last year, an internal military assessment indicated that the defective ammunition and weaponry provided by the OFB had caused casualties in the military and bled the treasury. The report states that there have been 403 accidents in the past six years, which have resulted in the the death of 27 soldiers and a loss of Rs 960 crore.
The 27 deaths cited in the military’s assessment included the 19 that occurred in an accidental 2016 mine explosion at a depot in Pulgaon, Maharashtra.
OFB retaliate with a statement saying that only 19% of accidents involving defense ammunition between January 2015 and December 2019 could be attributed to the council.
Accusing the military and media of selective reporting, the OFB said its own records showed that between 2011 and 2018 there were more than 125 accidents involving ammunition from other sources, domestic and foreign.
He even clarified that the Pulgaon accident involved anti-tank mines which had been developed by the Defense Research and Development Organization (DRDO) and were manufactured strictly according to their design. “Design flaws were subsequently noticed and appropriate changes are being assessed,” he said.
The public feud of the past year has shown the state of affairs between the armed forces and the OFB.
Government says workers will be protected
OFB unions have been protesting against corporatization for years, fearing that it will ultimately lead to job cuts.
The government has told unions that it is committed to protecting interests of employees. It was decided that all OFB employees (Group A, B & C) belonging to the production units would be transferred to legal persons by initially presumed delegation for a period of two years without modifying their conditions of service as employees of the central administration.
The retirement obligations of retirees and current employees will continue to be assumed by the government.
(Edited by Arun Prashanth)
Read also : India’s military theater orders could be delayed as there is no consensus on the basic structure
Why the news media is in crisis and how to fix it
India is all the more in need of free, fair, non-hyphenated and interrogative journalism as it faces multiple crises.
But the news media are in a crisis of their own. There have been brutal layoffs and pay cuts. The best of journalism is shrinking, giving in to crass spectacle in prime time.
ThePrint has the best young reporters, columnists and editors working there. Supporting journalism of this quality requires smart, thoughtful people like you to pay the price. Whether you live in India or abroad, you can do it here.
Support our journalism