Government Dissolves Ordnance Factory Board

Table of Contents

What has happened?

The Defence Ministry has issued an order for the dissolution of the Ordnance Factory Board(OFB) with effect from October 1 upon which,
Its assets, employees and management would be transferred to seven newly constituted Defence Public Sector Undertakings (DPSUs).
This would mean the end of the OFB, the establishment of which was accepted by the British in 1775.
“Accordingly, on and with effect from the appointed date, OFB, which has been set up vide Ministry of Defence letter no. 1(82)/78/D(Fy.I) dated 09.01.1979, shall cease to exist as a body.
Further, the Board position of Member (Finance), OFB shall also cease to exist on and with effect from the appointed date,”
The official memorandum issued by the Department of Defence Production (DDP) dated September 24 said.
These orders will come into effect from October 1, 2021 (appointed date), it stated.

OFB consisting of the Indian Ordnance Factories functions under the Department of Defence Production of Ministry of Defence, GOI.
It comprises 41 Ordnance Factories.
Corporate headquarter- Ordnance Factory Board, Kolkata.
Oldest organization (1712) run by the GOI.

It is engaged in research, development, production, testing, marketing and logistics of defence related products.
Total workforce of about 84,000.
OFB is the 37th largest defence equipment manufacturer in the world & 2nd largest in Asia.
Played key role in founding of research and industrial organisations like ISRO, DRDO, BDL, BEML, SAIL, etc.

Ordnance factories are currently engaged in the production of-
Tanks, armoured personnel carriers, mine protected vehicles, bombs, rockets, artillery guns, anti-aircraft guns, parachutes, small arms, clothing and leather equipment for soldiers.

Corporatization refers to the restructuring or transformation of a state-owned asset or organization into a corporation.
These organizations typically have a board of directors, management, and shareholders.
The main goal of corporatization is to allow the government to retain ownership of the company while allowing the company to run as efficiently as its private counterparts.

Accordingly, with effect from October 1, the management, control, operations and maintenance of these 41 production units and identified non-production units would be transferred
to seven government companies —
Munitions India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited, and Gliders India Limited.
The government has also decided to transfer the management, control, operations and maintenance of certain identified non-production units of OFB and identified surplus land at 16 production units of OFB to the Directorate of Ordnance (Coordination & Services) under the DDP, it stated.
On the over 70,000 employees, each of the new DPSUs is required to frame rules and regulations related to service conditions of the absorbed employees.
The service conditions of the absorbed employees would not be inferior to the existing ones.
“A committee would be constituted by the DDP for guiding the new DPSUs in this regard so that the absorption package given is attractive,” it said.

During the last two decades, various high-level committees have underlined the need to improve the functioning of the OFB and making its factories vehicles o3 expert committees had suggested such a move—
T K S Nair Committee (2000)
Vijay Kelkar Committee on Defence Reforms (2005)
Raman Puri Committee (2015) — had suggested such a move.
4^th committee headed by Lt Gen D B Shekatkar, recommended regular performance audits of all ordnance units.
f self-reliance for the country’s defence preparedness.

The present set-up is inconsistent with modern age requirements.
Being an arm of the government, the OFB and its factories cannot retain profits. Hence it is difficult to compete with rivals in the private sector.
Corporatisation will provide operational freedom and flexibility to the OFB & bring OFB at par with other PSUs.

An internal army assessment last year flagged concerns about faulty ammunition and armament supplied by the OFB causing army casualties and bleeding the exchequer.
It said 403 accidents over the previous six years resulted in the deaths of 27 soldiers and a loss of ₹960 crore.
“Lack of accountability and poor quality of production result in frequent accidents. This results in injuries and death of soldiers. On an average, one accident takes place per week,” the note said.
The OFB reacted to the army’s assessment as factually incorrect.
In 2017, the government took action against 13 defence ministry bureaucrats from the Indian Ordnance Factories Service,
For the repeated failures of the ordnance factories to meet the shortfall in ammunition and poor quality of products.
The CAG has also raised questions about the quality of products supplied by the OFB and its overall performance in its reports.

Employees fear that corporatisation is a step towards privatization.
This may lead to job losses.
Corporate entity would not be able to survive the unique market environment of defence products.
Fluctuations in orders, long gaps between orders, uneconomical order quantity.
The first Indian ordnance factory was set up in 1712 as a Gun Powder Factory in West Bengal.

Q) Which country was involved in its establishment?