The PM Narendra Modi-led Cabinet approved the “corporatization” of OFB, which has an annual turnover of around Rs 19,000 crore, into seven 100% government-owned entities dealing with ammunition and explosives, vehicles (tanks, combat and mine-protected vehicles, trawls), weapons and equipment (artillery and anti-craft guns, rifles), troop comfort items, optoelectronics, and parachutes.
“It’s a big, historic decision from the point of view of national security. The restructuring will make OFB autonomous, more productive and cost-efficient as well as enhance quality and increase exports. The overall aim is to make India ‘atmanirbhar’ (self-reliant) in defence preparedness,” said defence minister Rajnath Singh.
Singh, who heads the empowered group of ministers to oversee OFB’s transformation, took pains to assuage the concerns of around 70,000 OFB employees, who have earlier gone on strikes to protest against corporatization. “There will be no change in their service conditions (salaries, retirement and other benefits)…They should not be worried,” he said.
All OFB employees (Group A, B & C) belonging to production units will now be transferred to the corporate entities on `deemed deputation’ for an initial period of two years, without altering their service conditions as central government employees.
The OFB overhaul is desperately required in the backdrop of the 13-lakh strong Army repeatedly sounding the alarm over the unacceptably high number of accidents, deaths and injuries taking place in the field due to the poor and defective quality of ammunition being supplied for tanks, artillery, air defence and other guns, as earlier reported by TOI.
With OFB supplying around 90 of the total 163 types of ammunition used by the Army, the force has been reporting at least one accident per week, on an average, over the past several years.
The problems plaguing the OFB range from the high costs of products due to excessive overhead charges to inconsistent quality and huge delays in supplies. OFB also suffers from an utter lack of innovation and technology development. As per a rough estimate, nearly 75% of the production by OFB units is based on imported technology, said officials.
The government assessment is that OFB corporatization will help increase its turnover to Rs 30,000 crore by 2024-25, enhance its exports to 25% of the turnover, and increase self-reliance in technology from the existing 20-25% to 75% by 2028-29.
“The Cabinet decision will allow the seven new companies autonomy as well as help improve accountability and efficiency in the functioning of the 41 factories under them,” said an official.
“It will help overcome various shortcomings in the existing system by eliminating inefficient supply chains and provide these companies incentive to become competitive and explore new market opportunities, including exports. As a subordinate office of the defence ministry till now, OFB could not retain profits and therefore had no incentive to make profits,” he added.