On the auspicious day of Vijayadashmi (October 15, 2021) Prime Minister Narendra Modi will formally launch seven new companies which have been created following the dissolving of the Ordnance Factory Board (OFB).
Which are the seven companies created?
Seven companies which have been created will be wholly owned by the government. These include: Advanced Weapons and Equipment India Limited, Gliders India Limited, Munition India Limited, Yantra India Limited, Armoured Vehicles Nigam Limited, India Optel Limited and Troop Comforts Limited.
Why have these companies been created?
The Union Cabinet put its stamp of approval on the corporatization of OFB, in an effort to ensure competitiveness and boost efficiency. Through a government notification on October 1, 2021, the OFB was dissolved.
What happens to the pending contracts with the OFB?
Before the formal launch of the seven companies later this week, the Ministry of Defence has decided to convert all the contracts orders which had been given to the 41 factories totaling to about Rs 65,000 crore will now be with the seven companies which have been created.
According to a senior official, “Around 66 contracts which had been placed on the OFB by the three Services, different State Police and Central Armed Police Force (CAPF) have a cumulative value of around Rs 65,000 crore. And after several rounds of extensive discussions and negotiations with the stakeholders have been moved to the new defence companies.”
And, mobilization advance will be paid by the Services to the new DPSUs. The amount will be 60 per cent of the annual price of the indents. This means, “the new DPSUs have already been paid the mobilization advance by the indentors against the targets of the fiscal year 2021-22. The amount paid is more than Rs 7,100 crore,” the official added.
The three services order on the OFB for procurement of stores and capital items in the form of indents.Authorisations in the form of allocations to the CAPFs are issued by the Ministry of Home Affairs (MHA). These are meant to procure items from the OFB. Before the decision to dissolve the OFB was taken, as on 1, April 2021, pending orders in the order book of the OFB from Services, the MHA and others totaled over Rs 55,000 crore.
As has been reported by Financial Express Online earlier this year, for issues related to indents and orders pending with the OFB post corporatisation, the Department of Defence Production (DP) had constituted an Empowered Group of Officers (EgoO). This EgoO is chaired by Additional Secretary DP and there are representatives from concerned ministries and the three Services.
The new companies will produce vehicles, weapons and equipment, ammunition and explosives, parachutes and ancillary products, troop comfort items, and opto-electronics gear.
