High-level panel may review Ordnance Board
Officials said the proposal to convert OFB into one, or more than one, 100% government-owned corporate entity would enhance the OFB’s “functional autonomy”.
Officials said the focus will be on improving the OFB and the changes are aimed at making the factories accountable, more efficient, increase their production capacity and ensure timely supply of products. Making the OFB better functional is part of the defence ministry’s 100-day agenda.
This comes in the backdrop of concerns being raised over the past few decades on the OFB’s functioning, which “lacks a professional attitude as is required from such a production organisation”, officials said. The OFB’s 41 Ordnance Factories produce tanks, armoured vehicles, artillery guns, small arms, ammunition, tents and boots. The primary customers are the three defence services and paramilitary forces.
Officials said the proposal to convert OFB into one, or more than one, 100% government-owned corporate entity would enhance the OFB’s “functional autonomy”. This would bring areas such as R&D, quality control and financial accounting under the management of ordnance factories. “They will be free to take policy decisions for market expansion, technological upgradation by Transfer of Technology agreement and joint ventures, enabling them to play the role of lead designer, integrator and key market player in the defence sector,” an official said.
While it is expected to improve their competitiveness, it would reduce import dependency and increase production capacity, said officials. The timely supply and quality of supplies by the factories will be improved. “Currently, OFB is a production centre with dependence on expensive foreign technology. In becoming a corporate entity it would move from a production based to technology based organisation, enhancing self-reliance,” explained an official.
Corporatised ordnance factories may not require finances from the government to fund modernisation and R&D and can become financially self-supporting organisation. “These factories could also form alliances with Indian and overseas companies to develop new products and carve out a niche in the international market,” an official said.
Currently, decisions for the OFB such as plant modernisation and entering into joint ventures are subject to government regulation, reducing their leverage. Even for an investment of Rs 10 crore, it needs the defence ministry’s approval, causing delays. As a government department, the OFB cannot retain profits, said an official.
“The OFB, in its present structure, may not be appropriate to carry out production activities and stand in competition with its competitors in the private industry,” said an official.
The OFB has, till now, supplied products to the armed forces on a nomination basis, which has not given it the “incentive to improve quality”.
“There is minimal innovation... There is low productivity of plant, machinery and manpower... Working under the cushion of government procedure, there is no penalty for delayed delivery,” an official added.