PremiumThe decision to corporatize the Ordnance Factory Board – which controls the 41 ordnance factories -- was announced last year by Nirmala Sitharaman as part of a package to make India self reliant in defence hardware production
The cabinet chaired by Prime Minister Narendra Modi on Wednesday cleared the corporatization of the Ordnance Factory Board into 7 companies paving the way for them to more cost efficient, productive and profitable besides increasing competitiveness, a person familiar with the matter said.
The decision to corporatize the Ordnance Factory Board – which controls the 41 ordnance factories -- was announced last year by Finance Minister Nirmala Sitharaman as part of a package to make India self reliant in defence hardware production. The board will now be split into seven entities owned by the government that will produce ammunition and explosives, vehicles, weapons and equipment, troop comfort items, opto-electronics gear, parachutes and ancillary products, the person cited above said.
“This move would provide these companies with autonomy as well as help improve accountability and efficiency," the person cited above said.
An empowered group of ministers (EGoM), constituted under the defence minister Rajnath Singh last year, will oversee the board’s corporatisation and also take decisions on related matters, the person said.
Ordnance factories currently manufacture tanks, armoured personnel carriers, mine protected vehicles, bombs, rockets, artillery guns, anti-aircraft guns, parachutes, small arms, clothing and leather equipment for soldiers. However, there have been complaints from the defence forces that the quality of products manufactured by the OFB were substandard. News reports had last year said that the Indian army in an internal assessment had flagged concerns about faulty ammunition and armaments supplied by the OFB causing casualties and causing wastage of public finances. The news reports had said that some 403 accidents over the previous six years resulted in the deaths of 27 soldiers and a loss of ₹960 crores to the exchequer. The Comptroller and Auditor General had repeatedly raised questions about the quality of products supplied by the OFB and its overall performance in its reports.
“The restructuring will transform the ordnance factories into productive and profitable assets, deepen product specialisation, boost performance and improve quality, cost efficiency and accountability," a second official said. The development is being seen as a major move towards achieving self-reliance in defence manufacturing, the second official said. It is expected that seven new professionally-managed entities will increase their share in the domestic market as well as 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," the first official said.
It is unclear how the workers of the ordnance factories will see the move. The decision last year met stiff resistance from workers’ unions. Three groups of workers had given a joint strike notice last August against the government’s plans to corporatise the board. The proposed countrywide strike was called off last year after a a co called reconciliation meeting.
According to the two officials above, the government has ensured that the service conditions of the existing central government employees of OFB are protected, while taking this decision. 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 – of categories A, B and C -- from different production units would be transferred to the corporate entities on deemed deputation for an initial period of two years without changing their service conditions as government employees, Mint 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.
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