India restructures its 41 military factories into corporate entities

IDD Insight

Indian Government in a decision to allow wider options for the military equipment making industry, has restructured the ownership-pattern of the 41 factories under the Ordnance Factory Board (OFB), an entity under the Ministry of Defence.

The OFB, which is  legacy of the British rule in India, will not exist as an entity in its present from or structure. Seven public sector undertakings ( or Government owned companies)  are planned to be created under the MoD. The 41 OFB factories will be subsumed under one or the other new companies based on an assessment of manufacturing abilities of the factory.

A General Atomics drone in action: Advt

These factories produce everything from, Artillery guns, tanks, heavy vehicles, specialised  wires, rifles, ammunition etc. The  manufacturing process covers wide spectrum of engineering – mechanical, electrical, metallurgical, chemical, textile, leather, optics and electronics.

A decision to restructure the ownership of the factories was taken by the Union Cabinet – the council of Ministers – of the Narendra Modi Government

Seven sectors which will subsume the factories

The seven  new – yet to be named — PSU entities will each cover a separate sector of the manufacturing stream. These seven sectors are

  • Ammunition & Explosives
  • Vehicles
  • Weapons & Equipment
  • Troop Comfort Items
  • Opto-Electronics
  • Parachute group
  • Ancillary

These will engage in production of ammunition of various caliber and explosives, in production of defence mobility and combat vehicles such as Tanks, Trawls, BMP and Mine Protected Vehicles

Besides production of small arms, medium and large caliber guns and other weapon systems. This was expected to increase the share in the domestic market as well as product diversification and export orders.

Russian origin T-90 tanks are made under licence by OFB

What is the Change

After the OFB that is a  ‘subordinate office’ of the Ministry of Defence, is scrapped, the seven companies will be registered under the Companies Act 2013.

The Government has also decided to delegate the authority of the Cabinet to the Empowered Group of Ministers, constituted under the Minister of Defence, to decide upon the matters related to implementation.

The group also has the Indian Home Minister, the Indian Finance Minister, the Indian Minister for Labour and Minister of  State in the Indian Prime Minister’s Office.

New move provides flexibility

Being an office under the MoD, the factories  of the OFB had little chance to tie-up with foreign entities or have the flexibility to take decisions that any corporate set-up needed to take. 

The move is expected to improve autonomy, accountability and efficiency.

So far the OFB products are priced on a cost based methodology without charging any profit over the cost of production for supply to the armed forces.  Since OFB is nominated as a production agency for supply of core items to the armed forces, no comparison with international prices can be made.

The Russian AK 203 rifle that is planned to produced jointly with OFB

The factories now have a chance to into productive and profitable assets; bring about specialization in the product range; improving quality and cost-efficiency.

Besides the 1.6 million strong Indian Armed Forces. The OFB factories have other customers like Central Paramilitary Forces, State Police Forces for supplying arms, ammunition, clothing, bullet proof vehicles and mine protected vehicles

Employees remain as they are: Partners need to watch

The employees of the OFB —  approx 80,000 – remain as it is. There is no change to their service conditions. The pensions and post retirement benefits too shall remain the same. An Empowered Group of Ministers (EGoM) will oversee and guide the entire process of corporatisation of OFB, including transition support and redeployment plan of employees while safeguarding their wages and retirement benefits.

The OFB is 246 years old

Some time in 1775, the British authorities accepted the establishment of Board of Ordnance in Fort William, Kolkata.  In 1787 a gun powder factory was established at Ishapore West Bengal which started production from 1791. The British set up 18 ordnance factories the rest have come up after India became independent in 1947.Read it here   As of now the OFB has 41 Factories, 9 Training Institutes, 3 Regional Marketing Centres and 4 Regional Controllers of Safety. Read it here

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