Ordnance Factory Board: Know more about OFB getting dissolved from Oct 1

By: |
September 30, 2021 3:21 PM

Despite strong protests by the workers federations, the government took a decision to corporatize these Ordnance Factories (OFs). So starting tomorrow all the 41 OFs which had come up back in 1801 will cease to exist.

The main idea behind this has been efforts to improve the efficiency in the functioning of the units; improvement in the quality and making the end products competitive.

From tomorrow (Oct 1, 2021), a new chapter will be written when the 220-year-old Ordnance Factory Board (OFB) and associated units will stand dissolved. After getting dissolved they will be under seven PSUs (Defence PSUs) and they will be corporatized.

What does this mean?

This means that according to a government notification the OFB, all its employees, assets and operations are going to be transferred to the seven new DPSUs that have been set up earlier this year.

Despite strong protests by the workers federations, the government took a decision to corporatize these Ordnance Factories (OFs). So starting tomorrow all the 41 OFs which had come up back in 1801 will cease to exist.

Nine training institutes, five regional controllers of safety, and three regional marketing centres will be moved out of the OFB umbrella.

What were these OFs manufacturing?

They were making ammunition, supplies and weapons which are used by the Indian armed forces, paramilitary forces as well. These include military and civilian grade arms and ammunition; military vehicles; chemicals for the missile systems, parachutes, clothing for the troops; electronic and optical devices; general store items; explosives; propellants; armoured vehicles.

When were the recommendations for corporatization made?

In the last two decades, three expert committees looking into the defence reforms recommended in some form or the other. These include – in 2000 the TKS Nair Committee; this was followed by Vijay Kelkar Committee in 2005; and then in 2015 Vice Admiral Raman Puri Committee.

Later there was another committee which was set up by the then defence minister Manohar Parrikar and chaired by Lt Gen D B Shekatkar. While this committee did not suggest corporatisation, it did however recommend audits of all the Ordnance Units on a regular basis.

Why corporatization?

The main idea behind this has been efforts to improve the efficiency in the functioning of the units; improvement in the quality and making the end products competitive.

Why?

The OFB which is directly under the Ministry of Defence was unable to make profits, there was lack of incentives, which led to high production of costs, low productivity and there was no flexibility at the managerial level.

There have been several protests and discussions took place with the workers’ federations related to the government’s plan to corporatize OFB. The fears listed by the employees have been related to job losses, and due to unstable demand-supply dynamics of the defence products market, the corporate entity will fail.

There have been arguments that the OFs have been innovative and have provided “war reserves’’.

When did the process start for the dissolving of the OFB?

In 2019, among the 167 “transformative ideas’’ corporatisation was listed to be implemented in the first 100 days of the second Narendra Modi government.

Last year in May, under the Atmanirbhar Bharat initiative, the finance minister Nirmala Sitharaman had announced the decision to corporatise OFB.

This was followed by a consortium led by KPMG Advisory Services, a strategy and implementation consultant for the proposed corporatisation. They were appointed by the government.

On September 11, 2020, an Empowered Group of Ministers (EGoM) for Corporatisation was formed. This EGoM was headed by Defence Minister Rajnath Singh as the chairman. The task of this EGoM was to oversee and guide the entire process. This process included a redeployment plan of employees; safeguarding their wages and retirement benefits and to provide support during transition.

Later that year in October, a proposed strike by workers’ federations was declared “invalid and illegal’’.

No reconciliation was reached despite talks between the three federations and Ministry of Defence officials.

Fast forward, in June 2021, the government announced its decision to split the OFB into seven DPSUs.

At the end of July 2021, the government adopted an Essential Defence Services Ordinance (EDSO). This ordinance’s main aim was to mainly stop the workers of the OFs from going on strike.

Which are the seven DPSUs?

In a written reply, on August 2, MOS for Defence Ajay Bhatt said that the employees shall continue to be subjected to rules and regulations as applicable to the Central Government.

According to the reply, the allowances, pay scales, medical facilities, leave, career progression and other service conditions will be governed by the extant rules, orders and regulations which were applicable to the central government servants. Also, the government will take care of the pension liabilities of the retirees and existing employees.

Advanced Weapons and Equipment India Ltd; Troop Comforts Ltd; Munitions India Ltd, Armoured Vehicles Nigam Ltd; Yantra India Ltd; Gliders India Ltd and India Optel Ltd.

According to the government order, each of these PSUs will run clusters of OFs which will be involved in manufacturing similar categories of products. Also, the marketing and training establishments will be divided among the seven PSUs.

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