The 246 years old Ordnance Factory Board (OFB), set up by the British in 1775, has been scrapped. It’s the end of a monolith, an ever-sleeping giant which never got up from deep slumber even in the most trying times for the nation. The 41 odd Ordnance Factories (OF) spread across the country will be amalgamated into seven new Public Sector Undertakings (PSU).
It’s a major decision taken by the Union Cabinet. The OFB and the OF came under the Ministry of Defence. Seven companies are planned to be created, each carrying out a specific manufacturing role. A few months ago, speculation was rife on whether the Government would actually go through this step (refer to the statement of the Defence Minister on the corporatization of OFB on 16 May 2020) or take a step back given the threat of striking trade unions at OFB. In a commendable move, the Government tackled this issue by corporatizing the OFB on one hand while an assurance given by the Defence Minister to the 70,000 OFB employees that their service conditions will remain the same.
The OF is being managed by a three-layered system with the Department of Defence Production (DDP) on top, OFB next, and lastly, the General Manager who handles day-to-day functioning. The 41 OF are broadly classified into five operating groups as follows:
Ammunition & Explosives 11
Weapons, Vehicles & Equipment 11
Materials & Components 8
Armoured Vehicles 6
Ordnance Equipment Group 5
Each of the above 41 OF would be subsumed into the seven unnamed entities; each covering a separate sector.
The group of new entities will be as follows:
Ammunition and Explosives
Weapons and Equipment Group
Troop Comfort Items Group
The ‘Ammunition and Explosives group’ will engage in the production of ammunition of various calibers and explosives, both for in-house use and exports. The ‘Vehicles group’ would engage in the production of defense mobility and combat vehicles such as Tanks, Trawls, BMP, and Mine Protected Vehicles. The ‘Weapons & Equipment group’ would engage in the production of small arms, medium and large-caliber guns, and other weapon systems. The ‘Opto-Electronics group’ would engage in the production of binoculars, night vision devices, and other sighting systems. The ‘Parachute group’ would basically be dealing with parachutes and accessories. The ‘Ancillary group’ would be dealing with material, components, and accessories. The ‘Troop Comfort Items group’ would be dealing with bulletproof jackets, clothing items, high altitude clothing items, and associated equipment.
The forces have been seeking improved accountability and efficiency from the OF and the newly created PSUs could prove to be productive and profitable assets. The corporate culture has to be built in right from the beginning to enhance competitiveness, improve quality and cost-efficiency. The reduction from 41 OF to seven PSUs will ensure optimization of resources.
Deep specialization in product innovation and development is the call of the day if we were to achieve variety as desired for export. The modernization of these PSUs must be the foremost step if they have to manufacture world standard equipment that is both efficient and cost-effective. Funds for capital acquisition can be raised from excess land monetization.
To enhance productivity, efficiency and accountability of the newly created PSUs, some suggested measures are:
Qualified individuals should be allowed lateral entry based on their professional competence for efficient running and management of these PSUs.
There is an urgent requirement to critically assess the strategic need and commercial viability of some OF. The OF which is into the manufacture of low technology items or the ones which are abundantly available in the open market should be closed down. The decision should be based on the production data, revenue generation, and manpower and machinery utilization over the last 10 years.
The OF being closed down should be disinvested to leverage their value and help in generating capital, which in turn can be used for their modernization and capacity expansion projects.
The seven PSUs must be reorganized to be lean, modern, and competitive so that they are more efficient and effective. Ensure in-house research & development (R&D) and form joint ventures (JV) with private industries.
Further, they should be made fully accountable for their performance including time delays and price-overruns, if any. The monitoring should be directly under the monitoring cell functioning under the Defence Minister secretariat.
The small or low-tech tasks and jobs should be outsourced to the MSME sector and enable them to grow.
The Indian Ordnance Factory Service (IOFS) officers need to take on responsibility with accountability if they need to exist.
There is a need to reorient and up-skill/refresh the technical skills of the existing workforce employed at these organizations and gradually weed out the inefficient ones. Rules should be framed to compulsory attach the freshers with frontline troops (for a period of three months) that will ensure a sense of moral responsibility and timeliness in their work ethos.
The Government has decided to delegate the authority of the Cabinet to the Empowered Group of Ministers (EGoM) to take decisions on matters related to the implementation of the aforesaid and other incidental matters. Since the defense minister will himself lead this EGoM, along with the home minister, the finance minister, the minister for labor, and the minister of state in the Prime Minister Office (PMO); hopefully the timelines would be strictly adhered to.
A corporate entity functions as an autonomous body with all inputs that are required, under its control. There should be a continuous value addition to engineering aspects, constant quality standards, and continuous cost-control measures; for products manufactured under the new entities. It’s necessary to outsmart the adversary and be a global player in arms exports. It is to be seen how the Government handles the issue. The strategic asset should flourish post ‘modification and modernization. They should fulfill the desire for not only indigenization but help achieve USD 5 billion export target by 2025.
Source: Financial Express