OFB Corporatization – Still a long way to go

It’s astonishing that the MoD aspires to attain by means of corporatisation of the OFB the targets that might not be achieved all this whereas the Board functioned beneath its direct administrative management.

By Amit Cowshish, 

The Important Defence Providers Ordinance (EDSO) promulgated by the Centre final week makes it unlawful for the 70,000 plus employees and officers working the community of the 41 ordnance factories throughout the nation to strike work towards the federal government’s resolution to corporatise the Ordnance Manufacturing facility Board (OFB) that administers these factories and different related organisations.

Whereas the ordinance might have eliminated a serious obstacle in implementing the tendentious resolution, it additionally betrays an impulsive streak in decision-making and the absence of enough planning or blueprint for reaching the supposed outcomes. The Ministry of Defence (MoD) nonetheless has a protracted method to go and cross a number of hurdles to attain full corporatisation and realise its supposed advantages.

The advice to corporatise the OFB to enhance its effectivity was made by the MoD-appointed Kelkar Committee in 2005 nevertheless it remained in limbo until it was resurrected by Finance Minister Nirmala Sitharaman in Could final 12 months as part of the package deal to restore the pandemic-savaged financial system. Because the later occasions present, this abrupt announcement was made with none groundwork or readability of objective past nebulous notions of defence reforms wanted for reaching Atmanirbharat, or self-reliance, in defence.

The fast fallout of the announcement was the employees’ federations’ resolution to go on strike which was later withdrawn by them following the violent clashes within the Galwan Valley between the Indian Military (IA) and China’s Individuals’s Liberation Military (PLA). The federal government too agreed to carry its hand and launch negotiations with the employees’ federations, which evidently produced no fruitful outcomes.

Showing earlier than the Standing Committee on Defence in 2008, Dr Vijay L Kelkar, chairman of the eponymous committee that really useful OFB’s corporatization, had counselled the committee to first meet the employees’ federations to acquire their viewpoint. It was a transparent pointer to the primary hurdle the OFB’s corporatisation may face and the necessity to overcome it, however evidently his recommendation was not heeded, ensuing within the deadlock after the precipitative and avoidable announcement of the choice by the finance minister final 12 months.

In the meantime, strain was constructed by means of useful leaks of the IA’s inside report back to the media which blamed the OFB for 403 accidents between 2014 and 2020 as a consequence of faulty ammunition equipped by it, leading to 27 fatalities and a lack of Rs 960 crore. It was additionally claimed that this quantity may have financed the acquisition of 100 artillery weapons. Expectedly, the ensuing outrage strengthened the case for corporatisation.

The OFB protested that the report, which was not even shared with it, failed to understand that poor gun upkeep, defective firing drill and un-validated design adjustments within the weapon techniques are amongst a number of causes for such accidents. The OFB additionally identified that of all of the circumstances involving casualties, by which investigation had been accomplished, a mere 2 per cent have been attributable to it and that between 2011 and 2018, there have been over 125 accidents involving ammunition procured from different home and overseas sources.

The coup de grace of the OFB’s response was the assertion that the defective ammunition procured from overseas in the course of the 1999 Kargil struggle may have financed the procurement of a further 55 artillery weapons. Unsurprisingly, all these assertions, calling into query the first justification given by the IA for the OFB’s corporatization, have been largely ignored by the media and the strategic neighborhood which proceed to contemplate corporatisation because the panacea for all of the ills besetting the ordnance factories.

Breaking the following lull, on June 15 the Union Cupboard accepted the plan to transform 41 ordnance factories managed by the OFB beneath the watchful eyes of the Division of Defence Manufacturing (DDP) into seven firms on the traces of the 9 already current Public Sector Undertakings (DPSUs).

The Cupboard resolution and the Ordinance that adopted however, the street forward for transmogrifying the OFB into seven firms to fabricate state-of-the-art defence materiel and make inroads into the profitable export market, which is what Defence Minister Rajnath Singh mentioned the first goal of the reform, could also be bumpy.

That is borne out by the truth that an empowered Group of Ministers, headed by the defence minister, has been constituted to supervise corporatisation, which suggests that the federal government itself foresees a number of impediments that might require intervention on the highest political stage to beat them. These impediments might be associated to, for instance, the standing of the officers and employees who’re presently authorities staff however will stop to be so after corporatisation.

Reorganisation of the ordnance factories can be equally difficult, Whereas just a few clusters of ordnance factories are co-located at one station, as within the case of the group of 5 factories situated at Kanpur, a number of of them are situated at remoted stations like Chandigarh, Dehradun, Muradnagar and Nalanda. It’s not going to be straightforward to combine them into viable corporations by way of geographical unfold and core competence, full all of the authorized formalities and represent acceptable Boards of Administrators, with out which administrative, manufacturing, and value efficiencies can’t be achieved.

Big investments can also be required to improve and modernise the factories for them to have the ability to manufacture state-of-the-art defence materiel and compete with the non-public sector in India and the overseas producers within the export market. This may occasionally change into an issue for an impecunious MoD. The monetary issue may maybe be overcome by means of disinvestment or privatisation of the firms, however it’s a time-consuming and unsure course of.

With the MoD going through an everlasting useful resource crunch and actively selling the non-public sector, the brand new firms face the prospect of being crowded out of the defence market as they can’t be reworked into extremely environment friendly manufacturing homes able to giving the non-public sector a run for his or her cash any time quickly.

It’s astonishing that the MoD aspires to attain by means of corporatisation of the OFB the targets that might not be achieved all this whereas the Board functioned beneath its direct administrative management. It is usually ironic that the strategic neighborhood that by no means tires of lambasting the present DPSUs for being inefficient, unable to provide state-of-the-art gear, and vulnerable to value and time overruns, needs one other seven firms to be added to the listing of the 9 current items.

Within the circumstances, it might certainly be astonishing if OFB’s corporatization is accomplished by the top of the 12 months as anticipated by the federal government and the newly fashioned firms begin producing the anticipated outcomes instantly thereafter. There appears to be no plan in place to deal with the results of Murphy’s Legislation, which states that ‘Something that may go mistaken will go mistaken’. Unfounded overconfidence is not any substitute for calculated dedication.

(The creator is former Monetary Advisor (Acquisition), Ministry of Defence. Views expressed are private and don’t replicate the official place or coverage of Monetary Specific On-line.)