On June 16, 2021, the Union Cabinet, headed by Prime Minister Narendra Modi, cleared the corporatisation of India’s main producer of weapons and military equipment, the Ordnance Factory Board (OFB), to boost its efficiency and competitiveness. This long-awaited reform in the country’s defence manufacturing sector aims at to make India self-reliant in defence production. The first Indian ordnance factory was set up in 1712 by the Dutch Company as a GunPowder Factory in West Bengal. OFB is an umbrella body for the ordnance factories and related institutions, and is currently a subordinate office under the Ministry of Defence (MoD). The board’s corporatisation and decisions on other related matters will be taken by an empowered group of ministers (EGoM), constituted last year under the defence minister.
Now, the board, which controls 41 ordnance factories, will be split into seven government-owned entities and will produce ammunition and explosives, vehicles, weapons and equipment, troop comfort items, opto-electronics gear, parachutes, and ancillary products. Ordnance factories are currently engaged in the production of tanks, armoured personnel carriers, mine-protected vehicles, bombs, rockets, artillery guns, anti-aircraft guns, parachutes, small arms, clothing, and leather equipment for soldiers.
Various high-level committees had underlined the need to improve the functioning of the OFB and turn its factories into vehicles of self-reliance for the country’s defence preparedness. As per Defence Minister Rajnath Singh, the decision to corporatise the OFB is a ‘historic one’. It is also a big decision from the point of view of national security.
Benefits of Corporatisation
As per the ministry of defence, some of the benefits of OFB corporatisation are as follows:
- The restructuring will transform the ordnance factories into productive and profitable assets, deepen product specialisation, boost performance and improve quality, cost efficiency and accountability.
- It is a big step towards achieving self-reliance in defence manufacturing.
- The seven new professionally-managed entities are likely to come up by the end of 2021 to increase their share in the domestic market through better capacity utilisation and also tap new export opportunities.
- Shortcomings in the existing OFB set-up will be removed by eliminating inefficient supply chains and provide these companies incentive to become competitive.
- It will provide autonomy to the OFB thus strengthening its decision mains process.
- Ammunition & Explosives group would deal with production of ammunition of various calibre and explosives with huge potential to grow exponentially, not only by way of Make in India but also by Making for the World.
- Vehicles group would mainly take up production of defence mobility and combat vehicles like Tanks, Trawls, BMP, and Mine Protected Vehicles which are expected to increase its share in the domestic market through better capacity utilisation and also explore new export markets.
- Troop Comfort Items group, Ancillary group, Opto-electronics group and Parachute group would constitute the entire structure.
- Apartfrom the Armed Forces, OFB would also supply arms, ammunition, protective gears, parachute, clothing, etc., to the Paramilitary Forces, CAPFs, and State Police.
Opposition of the Decision by OFB Workers
There are 42 ordnance factories spread all over the country. The factories, controlled by the board, employ more than 82,000 employees who have been against the move to corporatise it, and had resorted to a stir in 2019. Three federations of defence civilian employees of the OFB gave a joint strike notice in August 2020 against the government’s plans to corporatise the board. However, they called off their proposed countrywide strike after a reconciliation meeting.
The defence minister said that there would be no change in the service conditions of the OFB employees and the government was committed to safeguarding their interests. All OFB employees (Group A, B, and C) from different production units will be transferred to the corporate entities on deemed deputation for an initial period of two years without changing their service conditions as government employees. The pension liabilities of the retirees and existing employees will continue to be borne by the government.
Internal Army Assessment
An internal army assessment in 2020 flagged concerns about faulty ammunition and armament supplied by the OFB, which caused army casualties and bled the exchequer. About 403 accidents over the previous six years resulted in the deaths of 27 soldiers and a loss of ₹ 960 crore. Lack of accountability and poor quality of production, result on an average, one accident per week. However, the OFB reacted to the army’s assessment as factually incorrect.
The government took, in 2017, action against 13 defence ministry bureaucrats from the Indian Ordnance Factories Service for the repeated failures of ordnance factories to meet the shortfall in ammunition and poor quality of products. The Comptroller and Auditor General (CAG) has also raised concerns about the quality of products supplied by the OFB and its overall performance in its reports.
The OFB was established in 1775 as British authorities accepted the establishment of Board of Ordnance in Fort William, Kolkata. Therefore, in 1787, a gun powder factory was established at Ishapore which started production from 1791. There were 18 ordnance factories before India became independent in 1947. These factories have a history of more than 200 years old and now manufacture guns, missiles, tanks, and other such equipment for the armed forces.
The OFB products are priced on a cost-based methodology without charging any profit over the cost of production for supply to the armed forces. Since the OFB is nominated as a production agency for supply of core items to the armed forces, no comparison with international prices can be made.
© Spectrum Books Pvt Ltd.