With the Defence Ministry announcing the 101 item negative defence import list, Ministry and Army officials have called for speeding up the process of corporitasation of the Ordnance Factory Board (OFB) to improve its efficiency and prepare it to fully meet the requirements of the armed forces.
“A large number of ammunition requirements of the Army are procured from the OFB. However, there have been several quality issues with serious delays in addressing them, affecting preparedness or forcing the Army to look elsewhere. With several ammunition in the negative list, the OFB has to urgently upgrade to meet the requirements. The proposed corporatisation will go a long way in that,” a defence source said on condition of anonymity.
Staff oppose
In May, the government had announced that corporatisation of the OFB would be undertaken to improve autonomy, accountability and efficiency. OFB employees had opposed the move.
The Kolkata-headquartered OFB with 41 factories spread across the country functions as a department under the Department of Defence Production. Due to this, every decision and action needs the approval of the Cabinet, one official said. For instance, in 2001, the OFB was to set up a plant at Nalanda in Bihar to manufacture bi-modular charges for the Army with an initial investment of around ₹800 crore which went up to ₹2,000 crore later. But the plant had not been set up till date, the official stated.
Another official said that due to the present structure, there were several issues such as monopoly supply, quality issues, high cost of incidentals and overheads, lack of innovation and low productivity. In contrast, DPSUs do not have such hassles and have been establishing joint ventures and partnerships for technology development and other things.
Quality issues
The quality of ammunition and explosives built by the OFB has been a constant issue raised by the services which has led to accidents on several occasions in the past. For instance, in 2016, defective anti-tank mines, packed with poor quality explosives, which were isolated for demolition, exploded, leaving 16 dead at the Central Ammunition Depot (CAD), Pulgaon, in Maharashtra.
The deal with Russia to manufacture over 7.5 lakh AK-203 assault rifles in India has been stuck over pricing. The rifles are to be manufactured through an Indo-Russian joint venture with the OFB from the Indian side. However, the unit price of the rifles is quite high, particularly due to the high OFB overhead costs, another defence source said talking of the delayed deal.
With the focus on indigenisation and also an ambitious target to boost exports, reforming the OFB and converting it into a DPSU would aid the objective, the source said, adding, with the private sector now entering defence manufacturing in a big way, including ammunition, the restructuring would give impetus to the OFB to compete with them.
Several recommendations
The aspect of restructuring and corporatisation of the OFB has been recommended by several high level committees in the past. In 2000, the T.K.A. Nair Committee suggested conversion of the OFB into the Ordnance Factory Corporation Limited.
Subsequently, Dr. Vijay Kelkar Committee in 2004 observed that in the existing set-up, Ordnance Factories (OF) by the very nature of the products they manufacture and in the manner in which they manufacture have to continuously face the problem of obsolescence of existing technology, accessibility to newer technologies and their inability to meet requirement of the user.
Sustaining the OFs in the current structure would prove financially and strategically costly for the user and consequentially for the country’s defence preparedness in the long run,” it had stated. The existing dispensation by the government to Ordnance Factories should continue for a period of three years to help to steer the changed process internally, the Kelkar committee had suggested. The Raman Puri Committee in 2015 and the Shekatkar Committee in 2016 too had recommended corporatisation of the OFB.
