Cabinet clears corporatisation of OFB, to be split into 7 entities
The Union Cabinet, headed by Prime Minister Narendra Modi, on Wednesday cleared the corporatisation of the Ordnance Factory Board (OFB) -- India’s main producer of weapons and military equipment --- to boost its efficiency and competitiveness in a long-awaited reform in the country’s defence manufacturing sector, top officials familiar with the developments said.
The OFB, which controls 41 ordnance factories, will be split into seven government-owned entities that will produce ammunition and explosives, vehicles, weapons and equipment, troop comfort items, opto-electronics gear, parachutes and ancillary products, said one of the officials cited above, speaking on the condition of anonymity.
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.
“The restructuring will transform the ordnance factories into productive and profitable assets, deepen product specialisation, boost performance and improve quality, cost efficiency and accountability,” said a second official. He said it was a big step towards achieving self-reliance in defence manufacturing.
The government expects the seven new professionally-managed entities - likely to come up by the year-end – to increase their share in the domestic market through better capacity utilisation and also tap new export opportunities.
“The new structure will help overcome various shortcomings in the existing OFB set-up by eliminating inefficient supply chains and provide these companies incentive to become competitive. It will boost their autonomy too,” said the first official.
During the last two decades, various high-level committees have underlined the need to improve the functioning of the OFB and making its factories vehicles of self-reliance for the country’s defence preparedness.
Defence minister Rajnath Singh described the decision to corporatise the OFB as a “historic one.” “It is also a big decision from the point of view of national security,” Singh said.
The factories controlled by the board employ at least 70,000 people who have been against the move to corporatise it. Three federations of defence civilian employees of the OFB gave a joint strike notice last August against the government’s plans to corporatise the board.
The workers’ federations called off their proposed countrywide strike last year after a reconciliation meeting.
Singh said 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, Hindustan Times has learnt.
“The pension liabilities of the retirees and existing employees will continue to be borne by the government,” said the second official cited above.
An empowered group of ministers (EGoM), constituted under the defence minister last year, will oversee the board’s corporatisation and also take decisions on other related matters, the official added.
An internal army assessment last year flagged concerns about faulty ammunition and armament supplied by the OFB causing army casualties and bleeding the exchequer. It said 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 in frequent accidents. This results in injuries and death of soldiers. On an average, one accident takes place per week,” the note said.
The OFB reacted to the army’s assessment as factually incorrect.
In 2017, the government took action against 13 defence ministry bureaucrats from the Indian Ordnance Factories Service for the repeated failures of the ordnance factories to meet the shortfall in ammunition and poor quality of products.
The Comptroller and Auditor General has also raised questions about the quality of products supplied by the OFB and its overall performance in its reports.