Since Tuesday, more than 80,000 workers of the 41 ordnance factories across the country are on strike, protesting against the proposed restructuring of the Ordnance Factory Board (OFB). These factories manufacture weapons, ammunition, explosives and other equipment like armoured vehicles for the defence forces as well as foreign clients. Production at all these has come to a halt.
The 200-year-old OFB is currently a department under the Defence Ministry. The government plans to convert it into one or more corporate entities fully owned by the government, like the other public sector units.
At least three expert committees — T K S Nair Committee (2000), Vijay Kelkar Committee on Defence Reforms (2005), and the Raman Puri Committee (2015) — had suggested such a move. A fourth committee, headed by Lt Gen D B Shekatkar, did not go as far to suggest corporatisation but recommended regular performance audits of all ordnance units. The argument is that corporatisation would improve efficiency, make products cost-competitive and enhance quality.
“The present set-up and methods of OFB are inconsistent with requirements of the modern age which call for flexibility at top managerial levels. Being an arm of the government, the OFB and its factories cannot retain profits, and do not have any incentive to make any. So, OFB in its present structure of a departmental organisation may not be appropriate for carrying out production activities and competing with rivals in the private sector who have all the managerial and technical flexibility,” a Defence Ministry official said.
Restructuring has been discussed many times with employee bodies, inconclusively.
How the plan progressed
Corporatisation of ordnance factories was listed as one of the 167 “transformative ideas” to be implemented in the first 100 days of the Narendra Modi government’s second term. These ideas were proposed in early July based on the recommendations of the Sectoral Group of Secretaries in consultation with the relevant Groups of Ministers.
OFB’s top officials were called for a meeting with Defence Minister Rajnath Singh and ministry officials on July 18, during which a decision to finalise the plan was taken. Officials say a Cabinet note to give effect to corporatisation had been prepared, and circulated to stakeholder ministries for consultation.
In a statement, the Defence Ministry said: “Corporatisation of OFB will bring OFB at par with other defence Public Sector Undertakings (PSUs) of the Ministry of Defence. This is in the interest of OFB as it will provide operational freedom and flexibility to the OFB which it presently lacks. Besides, the interests of the workers will be adequately safeguarded in any decision taken on the subject.”
One of the fears of employees is that corporatisation is a step towards privatisation. They fear job losses. They also argue a corporate entity would not be able to survive the unique market environment of defence products.
“Converting the Ordnance Factories into a corporation is not commercially viable because of fluctuations in orders, long gaps between orders, uneconomical order quantity, and life cycle support required for 30-40 years after introduction of equipment. The experience of the past two decades is that corporatisation is a route to privatisation. Therefore, ordnance factories should continue as a departmental organisation,” says a letter sent to Defence Minister Rajnath Singh by the general secretaries of the three main employee federations that are leading the strike, affiliated respectively to the RSS, the CPM’s CITU, and the Congress party’s INTUC. The federations have also refuted the government’s claims that the OFB units lacked innovation and were unproductive.
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