October 2, 2022

OFB Corporatised – Golden Goose to Golden Duck

OFB was considered the Goose that laid Golden Eggs for the powers that be. So why privatise – best to disguise it as Donald Duck, ‘Golden Duck’, terming it corporatisation so that it keeps laying golden eggs.

Lt Gen Prakash Katoch

Sixteen months after Finance Minister Nirmala Sitharaman announced on May 16 last year that the Ordnance Factory Board (OFB) would be corporatised, the Ministry of Defence (MoD) has dissolved the OFB effective from October 1 transferring its assets, employees and management to seven Defence Public Sector Undertakings (DPSUs) as part of ‘Atmanirbhar Bharat’ according to a PTI release. But how is Atmanirbhar Bharat connected to corporatisation? Was OFB in violation of Atmanirbhar Bharat?

The seven new DPSUs are Munitions India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited and Gliders India Limited. All OFB employees stand transferred en-masse to the new DPSUs on terms of ‘foreign service’ without any deputation allowance (deemed deputation) initially for a period of two years. DPSUs are to seek permanent absorption option from the employees. A committee from the Department of Defence Production (DoDP) is to guide the DPSUs how to make the absorption package “attractive” – wow!

News reports of June 30, 2020 had confirmed government approval for restructuring of the OFB and its 41 ordnance factories (OF) into seven DPSUs segmented into: Ammunition & Explosives; Vehicles; Weapons & Equipment; Troop Comfort Items (TCI); Ancillary; Opto-Electronics, and; Parachute Group. Also, the DoPD had communicated that for ‘interim’ – first set of Board of Directors of the Corporate entities is to be appointed from senior serving officials of OFB/ DoPD, Armed Forces, CGDA and nine existing DPSUs; for CMD appointment, SAG and above level officers of Indian Ordnance Factory Services (IOFS), OFB, with minimum five years service in the SAG; for Functional Directors appointment, SAG officers of IOFS, OFB, with minimum two years service in the Grade, and; age – not more than 57 years on October 1, 2021.

All OFB employees stand transferred en-masse to the new DPSUs on terms of ‘foreign service’ without any deputation allowance (deemed deputation) initially for a period of two years. DPSUs are to seek permanent absorption option from the employees. A committee from the Department of Defence Production (DoDP) is to guide the DPSUs how to make the absorption package “attractive” – wow!

Previous attempts to corporatise OFB were stonewalled due to strikes by workers unions: Indian National Defence Workers’ Federation (INDWF) affiliated to Congress, All India Defence Employees’ Federation (AIDEF) affiliated to the Left and Bhartiya Pratiraksha Mazdoor Sangh (BPMS) affiliated to RSS/BJP, all under the umbrella of Confederation of Defence Registered Associations.

However, the Essential Defence Services Bill, 2021, passed by Parliament on August 5, 2021, bars employees in defence production units from going on strike. This is a good development though it is effective for one year as of now. But strike by worker unions is only one part. The bane of OFB has been inefficiency, lack of accountability, poor work culture, substandard products costlier than available off-the-shelf, wasteful expenditure and corrupt practices, which has also been pointed out by the Comptroller and Auditor General (CAG) periodically. How will this change with OFB employees and the 76,000 OF workers transferring en-masse to the new DPSUs?

How will corruption go with the same overall control of the deep state resident in governments at the Centre? Were the strikes even in face of Chinese aggression not on behest of foreign intelligence – was anyone probed? Few examples of the OFB functioning is as under:

Previous attempts to corporatise OFB were stonewalled due to strikes by workers unions: Indian National Defence Workers’ Federation (INDWF) affiliated to Congress, All India Defence Employees’ Federation (AIDEF) affiliated to the Left and Bhartiya Pratiraksha Mazdoor Sangh (BPMS) affiliated to RSS/BJP, all under the umbrella of Confederation of Defence Registered Associations.

  • Army found OFs supplying combat uniforms to troops three times more expensive than those available in open market of same material.
  • In 2020, Army reported faulty OFB ammunition resulted in 403 accidents over the past six years; deaths of 27 soldiers and loss of Rs 960 crores.
  • An internal assessment sent by Army to MoD last year said that 100 medium artillery guns could have been bought in place of the dud OFB ammunition lying around.
  • Army discovered this year that complete lot of one crore indigenous Tavor ammunition supplied by OFB was defective.
  • OFB could not produce any state-of-the-art small arms past seven decades. The INSAS 5.56 assault rifle was thrust on the military which gradually will get replaced by the AK-203 assault rifle through collaboration with Russia.
  • CBI found that the six ‘Dhanush’ guns handed over to the Army in 2019 amid media blitz of ‘Make in India’ had been fitted with Chinese bearings, not German as agreed to. These bearings did not pass the quality test of Gun Carriage Factory (GCF) but these were still fitted in the guns handed over to the Army.
  • No product of OFB has ever met the time schedule by default or design. The costs escalate accordingly to the benefit of?

The overall control and management in the new DPSUs will continue with the same DoPD-OFB-IOFS officials. The Armed Forces despite being primary users, find place only in the Board of Directors whereas they should have representation at every level. Relocation implies cost of uprooting, creation of additional infrastructure and acquisition of land which will be expensive being in urban areas. Production may be disrupted due to reorganisation and relocation.

The overall control and management in the new DPSUs will continue with the same DoPD-OFB-IOFS officials. The Armed Forces despite being primary users, find place only in the Board of Directors whereas they should have representation at every level. Relocation implies cost of uprooting, creation of additional infrastructure and acquisition of land which will be expensive being in urban areas. Production may be disrupted due to reorganisation and relocation.

Instead of including members from existing DPSUs in the Board of Directors, members should have been taken from the private sector, which appears deliberate ignored. If savings and ‘Atmanirbar Bharat’ was really the intent, DRDO entities should have been automatically merged into the new DPSUs, for example by combining:

  • DRDO’s Armament Research & Development Establishment (ARDE) with the DPSU Advanced Weapons and Equipment India Limited.
  • DRDO’s Aerial Development and Research Organisation (ADRDE) and Centre of Air Borne System (CABS) with the DPSU Gliders India Limited.
  • DRDO’s Vehicle Research Development Establishment (VRDE) and Combat Vehicles Research & Development Establishment (CVRDE) with the DPSU Armoured Vehicles Nigam Limited.
  • DRDO’s Defence Metallurgical Research Laboratory (DMRL) with the DPSU Advanced Weapons and Equipment India Limited.

Defence production in America has flourished with state-of-the-art technologies because defence production is wholly privatised. Government-controlled defence production is a success only in communist countries like China because rigid work schedule is enforced and production is closely monitored even in private industries. India’s chaotic democracy is witness to the worst work culture, slippages, wasteful expenditure and corruption in the government-controlled defence-industry, organisations and structures. The OFB required ‘privatisation’ decades ago but no Indian government has the will to take on the workers unions and/or the bureaucracy.  

The Hindustan Aeronautics Limited (HAL) too needed to be privatised years ago but the excuse given is it can lead to secrets being leaked to unwanted elements; as if all secrets of the wholly private American defence industry are in public domain. But that will not happen, same as for DRDO and OFB. OFB was considered the Goose that laid Golden Eggs for the powers that be. So why privatise – best to disguise it as Donald Duck, ‘Golden Duck’, terming it corporatisation so that it keeps laying golden eggs.

Keeping government control has terrific advantages. For example, 118 Arjun MK1 50-tonne tanks can be forced on the Army that already had two regiments of 124 Arjun Mk1 tanks and has been desperately looking for light tanks since the Chinese aggression in Eastern Ladakh in May-June 2020. The interesting part is that the workers federations have said that the recent order worth Rs. 7,523 crore to Heavy Vehicles Factory (HVF), Chennai for 118 x Arjun Mk1 is testimony to the reliability of the ordnance factories. But government will have its way. Pumping more money into OFB or DPSUs ensures regular supply of golden eggs!

Lt. Gen. Prakash Katoch is a veteran of Indian Army. Views expressed are personal and do not necessarily reflect the views of https://strategicaffairsindia.in

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