By N. C. Bipindra

New Delhi: India today took the long-awaited decision to dismantle the British-era ordnance factories and to create seven new state-run corporate entities that will handle manufacturing of weapons for the armed forces.

The ordnance factories corporatisation move has been initiated to bring in efficiency, competitiveness, and accountability into the functioning of the two-and-a-half-century-old institutions, according to Ministry of Defence officials.

The existing 41 ordnance factories, under the Kolkata-headquartered Ordnance Factory Board (OFB), would be subsumed by the seven new Public Sector Undertakings that would be set up in due course, and a go-ahead for this move was given by the Prime Minister Narendra Modi-led Cabinet in its meeting held during the day.

Minister of Defence Rajnath Singh described the decision to corporatise the OFB as a “historic one” during an interaction with a select group of journalists. “It is also a big decision from the point of view of national security,” Singh said, according to a Hindustan Times report.

OFB has been India’s foremost weapons producer for the armed forces and contributed heavily in arming India and ensuring national security preparedness. This decision means, OFB, as we know it today, would cease to exist once the Indian government’s cabinet decision is given effect by the end of the year.

Though these seven entities will be new corporate entities entirely, the existing 70,000-strong workforce of the OFB will see no change in their service conditions, according to the decision taken by the cabinet in its meeting. Their pension liabilities of the retired workers would continue and be borne by the national government.

Corporatisation of the ordnance factories, established by the then British government in 1775, was aimed at transforming them into productive and profitable assets, deepen specialisation in products, enhance competitiveness, improve quality and cost-efficiency, a report by The Hindu said.

The factories would be grouped to form one entity based on the type of weapon or product they produce. Factories producing ammunition and explosives would be grouped into one entity.

Similarly, factories that manufacture force mobility and combat vehicles such as tanks, trawls, BMP, and mine protected vehicles would be grouped into another entity.

Also, the institutions that produce small arms, medium and large calibre guns and similar such weapons would be converted into another entity for meet and increase its share of the domestic market, as well as for product diversification, they said.

In addition, troop comfort items group, ancillary group, opto-electronics group, and parachute group would constitute the other corporate institutions to be created.

The implementation of this cabinet decision would be supervised by the Empowered Group of Ministers (EGM) chaired by Rajnath Singh and this EGM would address any issue that may arise during the execution of the corporatisation plan.

The officials, who did not wish to be named citing rules, said this corporatisation of the OFB was a big step towards achieving self-reliance in defence manufacturing.

The government expects the seven new professionally managed entities to increase their share in the domestic market through better capacity utilisation and also tap new export opportunities, the Hindustan Times report said.

“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,” it said, quoting unnamed officials.

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.

The OFB employees have been against the corporatisation and their labour unions had given a call for a halting of work in the 41 factories in late 2019.

The Modi government had set up a committee headed by a defence ministry official to hold talks and convince the protesting employees that the benefits that accrue to them would not be diluted in any way by the government’s decision to corporatise the factories.

Rajnath 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 reported without mentioning where it got the information from.

In 2017, the government acted 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, according to the Hindustan Times.

An internal army assessment last year had 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, in its reaction to the army’s assessment, said it was factually incorrect.

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