Prime Minister Narendra Modi will on October 15 formally launch seven new defence companies carved out of the Ordnance Factory Board (OFB), four months after Union Cabinet cleared the board’s corporatisation to boost its efficiency and competitiveness in a long-awaited reform in the country’s defence manufacturing sector, officials familiar with the development said on Monday.
The new companies will be formally launched through video conference on the occasion of Vijayadashami, also known as Dussehra. The government issued an order last month, dissolving OFB with effect from October 1.
The OFB, which earlier controlled 41 ordnance factories, has been split into seven government-owned entities that will produce ammunition and explosives, vehicles, weapons and equipment, troop comfort items, opto-electronics gear, parachutes and ancillary products.
These new companies have been named Advanced Weapons and Equipment India Limited, Troop Comforts Limited, India Optel Limited, Munitions India Limited, Avani Armoured Vehicles, Gliders India Limited and Yantra India Limited.
“All the indents previously placed on the OFBs by various services, CAPFs and state police have been converted into deemed contracts. These deemed contracts numbering 66 have a cumulative value of more than ₹65,000 crore,” said one of the officials cited above.
“This process has been smoothly concluded following months of extensive consultations with all the stakeholders prior to the unveiling of the new defence companies,” he added.
A total of 60% of the annual price of the indents will be paid by the services to the new defence public sector undertakings as mobilisation advance, said another official. “Mobilisation advance worth over ₹7,100 crore for the financial year 2021-22 has been paid to the DPSUs by the respective indentors,” he added.
Ordnance factories were 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.
The government expects the seven new professionally managed entities to increase their share in the domestic market through better capacity utilisation and also tap new export opportunities.
During the last two decades, various high-level committees underlined the need to improve the functioning of OFB and making its factories vehicles of self-reliance for the country’s defence preparedness.
The Comptroller and Auditor General also raised questions about the quality of products supplied by OFB and its overall performance in several past reports.
The factories controlled by the board employed at least 70,000 people who have been against the move to corporatize it.
The All-India Defence Employees Federation is among the four workers’ associations that have decided to boycott the official inauguration of the new companies on October 15, even though the government said there would be no change in the service conditions of the OFB employees and it was committed to safeguarding their interests.
All OFB employees (Group A, B and C) from different production units have been transferred to the corporate entities on deemed deputation for an initial period of two years without changing their service conditions as government employees.
In 2017, the government took action against 13 senior 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.