Ordnance factories to move to commercial accounting system

Moving to commercial accounting system is the Ministry’s first step towards fulfilling recommendations of Kelkar Committee for restructuring ordnance factories.

Manohar Parrikar, Ordnance Factory Board, Indian National Defence Workers Federation, INTUC, Bharat Pratiraksha Mazdoor Sangh, All-India Defence Employees Federation, Kelkar committee, defence ministry, Ordnance Factories Board, OFB, Manohar Parrikar, OFB

Defence Minister Manohar Parrikar gave an in-principle approval last month to convert OFB into a Departmental Commercial Undertaking on the lines of Railways.

The defence ministry has asked Ordnance Factories Board (OFB) to start following a dual system of accounting, and maintain both commercial and government accounts for financial transactions. This came after Defence Minister Manohar Parrikar gave an in-principle approval last month to convert OFB into a Departmental Commercial Undertaking on the lines of Railways. DCUs are unincorporated enterprises owned, controlled and run directly by the government. These normally do not hold or manage financial assets and liabilities but charge for goods and services they provide on commercial basis.

Commercial system of accounting will clearly show profit and loss for each ordnance factory and OFB as a whole at the end of the year. With an annual budget of Rs 3,644 crore, OFB currently manages 41 manufacturing units and 32 other establishments across India, which produce arms, ammunition and military equipment for the armed forces, paramilitary and police forces.

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“DCU is a government department and its goods and services are sold at some price. The biggest DCU in the country is Indian Railways. We have been asking for the same status as that of Railway Board. For this purpose, commercial accounting is a must. So far, we have been issuing our products against book adjustment and not payment,” an OFB official told The Indian Express.

Moving to commercial accounting system is the Ministry’s first step towards fulfilling recommendations of Kelkar Committee for restructuring ordnance factories. But senior OFB officials said this decision does nothing to provide OFB with greater autonomy in decision-making and financial approvals. They fear that commercial accounting, with a focus on profit and loss, will harm factories that are intermediaries between feeder factories and ammunition factories. It could eventually lead to the demise of OFB.

Under the new accounting, the ordnance factories will find it hard to continue with the provision of systematic overtime payments being made to industrial employees and clerical staff. With every single factory focused on showing profits, these overtime payments will be first ones to come under pressure. Systematic overtime has already been objected to by the audit authorities.

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