OFB corporatisation gets Cabinet approval
Addressing a long pending reform, the Union Cabinet on Wednesday approved a plan to corporatise the Ordnance Factory Board (OFB), which has 41 factories, into seven fully government owned corporate entities on the lines of Defence Public Sector Undertakings (DPSU).
Once implemented, the OFB, the establishment of which was accepted by the British in 1775, will cease to exist.
“This is a historic decision and there should be no concern on the part of the employees. There will be no change in service conditions which is also mentioned in the Cabinet note,” Defence Minister Rajnath Singh said, assuring the 70,000 employees who had expressed concern over the proposed move.
It is a major decision in terms of national security and also make the country self-sufficient in defence manufacturing as repeatedly emphasised by Prime Minister Narendra Modi, Mr. Singh said.
This move would allow these companies autonomy and help improve accountability and efficiency, a defence official said. “This restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepening specialisation in the product range, enhancing competitiveness, improving quality and achieving cost efficiency,” the official said.
Currently, the Kolkata headquartered OFB functions as a department under the Department of Defence Production. There have been several recommendations by high-level committees in the past for corporatising it to improve efficiency and accountability.
All employees of the OFB (Group A, B and C) belonging to the production units would be transferred to the corporate entities on deemed deputation initially for a period of two years without altering their service conditions as Central government employees, the official explained. The pension liabilities of the retirees and existing employees would continue to be borne by the government.
The 41 factories would be subsumed into seven corporate entities based on the type of manufacturing. The ammunition and explosives group would be mainly engaged in producing ammunition of various calibre and explosives, with huge potential to grow exponentially, not only by way of ‘Make in India’ but also by ‘Making for the World’, the official said.
Similarly, the vehicles group would mainly engage in producing defence mobility and combat vehicles such as tanks, trawls, infantry and mine protected vehicles.
“The weapons and equipment group would be mainly engaged in production of small arms, medium and large calibre guns and other weapon systems and is expected to increase its share in the domestic market through meeting the demand as well as product diversification,” the official said. The troop comfort items group, the ancillary group, the opto-electronics group and the parachute group constituted the entire structure, the official stated.
The above structure would also help in overcoming various shortcomings in the existing system of the OFB by eliminating inefficient supply chains and provide these companies incentive to become competitive and exploring new opportunities in the market, including exports, the official added.
An Empowered Group of Ministers (EGoM), set up last September under the chairmanship of the Defence Minister, would decide upon the matters related to implementation and review any issues arising from time to time.