In a landmark decision, the Union cabinet on Wednesday approved the plan to corporatize the 41 Ordnance Factories into seven fully government-owned corporate entities, based on their production type. It means, the Ordnance Factory Board, establishment by British India in 1775, will cease to exist.
The Narendra Modi-led Cabinet gave its go-ahead to the long pending “corporatization” of OFB, which has an annual turnover of around Rs 19,000 crore, into seven 100 per cent government-owned entities.
According to a defence official, the move would allow the companies' autonomy and help improve accountability and efficiency. "This restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepening specialisation in the product range, enhancing competitiveness and improving quality and cost-efficiency," said the official.
Employees' union of Ordnance Factories has been opposing the move, fearing privatisation of factories.
Official sources maintained that the functioning of Ordnance Factory Board has come in for study by various high-level committees over the last two decades with the objective to improve their functioning and making these factories as vehicles of self-reliance for defence preparedness of the armed forces.
While taking this decision, the government has ensured that the service conditions of the existing central government employees of OFB are protected.
The existing 41 factories would be subsumed into seven corporate entities. The Ammunition and Explosives group would be mainly engaged in production of ammunition of various caliber and explosives with huge potential to grow exponentially, not only by way of Make in India but also by Making for the World.
Similarly, the Vehicles Group would mainly engage in production of defence mobility and combat vehicles such as Tanks, Trawls, BMP and Mine Protected Vehicles. This group is expected to increase its share in the domestic market through better capacity utilization and also explore new export markets.
The Weapons and Equipment Group would be mainly engaged in production of small arms, medium and large caliber guns and other weapon systems and is expected to increase its share in the domestic market through meeting domestic demand as well as product diversification.
In addition, Troop Comfort Items Group, Ancillary Group, Opto-Electronics Group and Parachute Group constitutes the entire structure.
The defence officials claimed that the new structure will help in overcoming various shortcomings in the existing system of OFB by eliminating inefficient supply chains and to provide these companies incentive to become competitive and exploring new opportunities in the market including exports.
"From transforming the Ordnance Factories into productive and profitable assets to deepen specialization in the product range, enhance competitiveness to improving quality and cost-efficiency are the key objectives of the new set up," the official added.
He further clarified that the government is committed to safeguard the interests of the 70,000 employees of OFB. It has been decided that all the employees of OFB (Group A, B & C) belonging to the production units would be transferred to the corporate entities on deemed deputation initially for a period of two years without altering their service conditions as central government employees.
The pension liabilities of the retirees and existing employees will continue to be borne by the government.
The government has also decided to delegate the authority of the cabinet to the Empowered Group of Ministers, constituted under the Minister of Defence, to decide upon the matters related to implementation of aforesaid government decisions and other incidental matters.