Military & Aerospace

From OFB to Seven DPSUs
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Issue Net Edition | Date : 27 Jun , 2021

Government has approved the Ordnance Factory Board (OFB) with 41 Ordnance Factories (OF) to be restructured into seven Defence Public Sector Undertakings (DPSUs) as under:

  • Ammunition & Explosives: Grouping 12 entities; Ammunition Factory Khadki, Cordite Factory Aruvankadu, High Energy Projectile Factory Tiruchirapalli, High Explosive Factory Khadki and seven Ordnance Factories located at Bhandara, Bolangir, Chanda Chandrapur, Dehu Road, Itarsi, Khamana, Nalanda and Varangaon.
  • Vehicles: Grouping five entities; two factories at Avadi (Engine Factory and Heavy Vehicle Factory), Machine Tool Prototype Factory Ambernath, Ordnance Factory Medak and Vehicle Factory Jabalpur.
  • Weapons & Equipment: Grouping eight entities; three factories at Kanpur (Field Gun Factory, Ordnance Factory, Small Arms Factory), Field Gun Factory Jabalpur, Gun and Shell Factory Cossipore, Ordnance Factory Project Korwa, Ordnance Factory Tiruchirapalli and Rifle Factory Ishapore.
  • Troop Comfort Items (TCI): Grouping four entities; Ordnance Clothing Factory Avadi, Ordnance Clothing Factory Shahjahanpur, Ordnance Equipment Factory Kanpur and Ordnance Equipment Factory Hazaripur.
  • Ancillary: Grouping eight entities; Grey Iron Foundry Jabalpur, Metal and Steel Factory Ishapore and six Ordnance Factories located at Ambermath, Ambajhari, Bhusawal, Dumdum, Katni and Muradnagar.
  • Opto-Electronics: Grouping three entities; Ordnance Factory Chandigarh, Ordnance Factory Dehradun and Opto-Electronics Factory Kanpur.
  • Parachute Group: Parachute Factory Kanpur.

The Department of Defence Production (DoPD) under Ministry of Defence (MoD) has communicated the following:

  • For the ‘interim’, first set of Board of Directors of the Corporate entities is to be appointed from senior serving officials of OFB/DoPD, Armed Forces, CGDA and nine existing DPSUs.
  • For CMD: SAG and above level officers of Indian Ordnance Factory Services (IOFS), OFB, with minimum five years service in the SAG.
  • For Functional Directors: SAG officers of IOFS, OFB, with minimum two years service in the Grade.
  • Age – not more than 57 years on October 1, 2021.

Previous attempts to corporatize OFB were stonewalled due to strikes by workers unions: Indian National Defence Workers’ Federation (INDWF) affiliated to Congress, All India Defence Employees’ Federation (AIDEF) affiliated to the Left and Bhartiya Pratiraksha Mazdoor Sangh (BPMS) affiliated to RSS/BJP, all under the umbrella of Confederation of Defence Registered Associations. Their fear has been loss of jobs, protection of salaries, pensions and change in work culture from the current laid back to hard work under more efficient system. 

On June 16, 2021, above three worker unions again strongly opposed the government decision to convert the OFB into seven DPSUs and said all three federations will launch a joint agitation against the government move. However, nothing has been heard of the agitation since then possibly because the Kolkata-based OFB headquarters and complete 70,000 strong work force of 41 ordnance factories are being subsumed in the seven DPSUs; all OFB employees (Group A, B and C) from different production units will be transferred to the corporate entities on ‘deemed deputation’ for initial two years without changing their service conditions as government employees. This implies bonanza of deputation allowance even to officials of IOFS and OFB who are in Group ‘A’ Services. Armed Forces are not in Group ‘A’ Services.

There is no doubt that the move to corporatize OFB after three government-appointed committees (TKA Nair Committee in 2000, Vijay Kelkar Committee in 2005, and Raman Puri Committee in 2015) is a long awaited welcome decision. The bane of ordnance factories has been inefficiency, lack of accountability, poor work culture, substandard products costlier than available off-the-shelf, wasteful expenditure and corrupt practices, which has also been pointed out by the Comptroller and Auditor General (CAG) periodically.

Army had found that Ordnance Factories were supplying combat uniforms to troops three times more expensive than those available in open market of same material. Last year, Army reported that faulty OFB ammunition had resulted in 403 accidents in past six years had caused deaths of 27 soldiers and loss of ₹960 crores. An internal assessment sent by Army to MoD had said that 100 medium artillery guns could have been bought in place of the dud OFB ammunition lying around. Later Army also discovered that complete lot of one crore Tavor ammunition supplied by OFB was defective.  

Now government has said that the restructuring of OFB will help improve the accountability, efficiency and competitiveness of these factories. But the speculation is that this will be an extremely tall order because the work culture can hardly change with 100 percent same employees being retained. Moreover, the overall control and management will continue with the DoPD-OFB-IOFS. In fact with assured employment, job security and now also ‘deputation allowance’ to expect better work culture and efficiency is an oxymoron! Inclusion of Armed Forces is only in the Board of Directors whereas they should be at every level being the primary users.

At the moment it is not clear whether the 41 ordnance factories will continue to stay at their present locations and merely come under the allotted grouping or relocate. This will be resisted by the Unions since the workers have grown roots in their present location and will not budge. State governments too will resist any uprooting of factories from their States. In addition relocation would imply cost of uprooting, creation of additional infrastructure and acquisition of land which will be expensive being in urban areas. Whether these expenses can be compensated from sale of land of vacated locations is questionable not only because of the quantum of sale proceeds but because finance ministry may grab the entire sale money or major share of it, as is being planned from the sale of defence land with the Services. How production levels will be affected during the reorganization including relocations as required also needs to be viewed in backdrop of the need to ramp up production with increasing threat levels.

Rather than including members from existing nine DPSUs in the Board of Directors, it would have been better to take members from the private sector or at least have independent directors from the private sector toobviate biases. Most importantly, we should have looked beyond merely corporatizing the 41 ordnance factories of the OFB. For example, why is the AK-203 Rifle Factory at Amethi not grouped with the new DPSU of ‘Weapons & Equipment’?

Similarly, government needs to prune the gigantic empire of the DRDO and consider combining certain DRDO entities with the new DPSU being established in the interest of overall integration, better management, economy and making surplus land available to the government:

  • DRDOs Aerial Development and Research & Development Organization (ADRDE) and Centre of Air Borne System (CABS) with the DPSU ‘Parachute Group’.
  • DRDO’s Vehicle Research Development Establishment (VRDE) and Combat Vehicles Research & Development Establishment (CVRDE) with the DPSU ‘Vehicles’.
  • DRDO’s Defence Metallurgical Research Laboratory (DMRL) with the PSU ‘Ancillary’.
  • DRDO’s Armament Research & Development Establishment (ARDE) with the DPSU ‘Weapons & Equipment’.

We have taken decades to reorganize the more than two centuries old OFB and its 41 ordnance factories. We should not take many more decades to examine the reorganization of the DRDO and how its several entities can be combined with the DPSUs and some laboratories combined within the DRDO. Finally, reorganization of the OFB and 41 ordnance factories into seven DPSUs will be of little use if efficiency levels are not increased considerably and accountability ensured.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Lt Gen Prakash Katoch

is a former Lt Gen Special Forces, Indian Army

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3 thoughts on “From OFB to Seven DPSUs

  1. The OFB are a Black Hole of corruption and incompetence,which has led to losses of Billions of USD, to date,to the Nation.The Baboos and others who run the OFB ,have blown holes, in every aspect of the operations of the OFB – from purchases,manufacturing.wastages,yields, losses of stocks,defectives,sales returns, costing frauds,labour contract frauds ……

    Pakistan exports JF-17s and the OFB can’t even export a screw driver.

    An Ordinance Factory cannot be run, on the basis of a “FOR PROFIT” motive.It is like the Nuclear Fuel Complex – which is NOT A CORPORATION.UCIL is a Company – but not the Nuclear Fuel Complex.

    The PURPOSE of the Corporatisation, is to WHITEWASH ALL THE FRAUDS AND LOSSES in the OFB ,and all its UNITS in India – and THEN, run it as a COMPANY – To provide the excuse to RETRENCH STAFF,and convert the labour, into piece rate workers (as most OFBs run at 50% capacity – and on many orders – then pay OT – as there are induced staff shortages).THEREFORE,THE STAFF COSTS ARE CUT, TO OFFSET THE LOSSES AND FRAUDS IN MANUFACTURING OPERATIONS.

    IT MUST BE NOTED THAT LOSSES AND FRAUDS IN OPERATIONS = DIVERSION OF ORDINANCE AND WEAPONS,TO “ALTERNATIVE USES”.

    To save the Political and Baboodom, FROM THE cost of sacking the staff – the best option, is to get a Board of Directors to axe the staff – and then use that legal cover, to raise capital, from the equity markets.

    Y Does the GOI have no capital ? Because all the banks are looted and busted – like the latest record making Rs 8000 crores bank fraud, on Canara Bank and 13 more banks,where Canara Bank was the lead bank.The borrower was Transstroy India Limited – owned by a TDP MLA.

    Netas have used Banks to loot the Indian People – as the persons who go to jail are the Baboos,Bankers and Borrowers – while the Borrower has paid off the Neta.

    The Netas will NOT recoup the Bank Frauds and Wilful defaulters – as that money,is with the NETAS – and thus,have to raise oil prices and sell PSUs – through ingeniou

  2. All workers should be on 3years contracts with extendable service based on performance . A third party independant audit of production quality must be done yearly . Of the present 75000 employees 75% given VRS , retired or simply sacked . Apprentices should be appointed based on diplomas , engineering and Bsc qualifications . Unions dissolved and right to strike abolished. The corrupt ordnance factories board disbanded and a new organisation formed with HQ at outskirts of Delhi . The secy defence and defence production must have no control of these clusters and the corrupt DGQA brought under CDS /Service chiefs . Accountability , responsibilty of all officers and workers defined and annually inspected by a independant private entity .

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