Beyond corporatisation: The road ahead for ordnance units


Corporatisation of the Ordnance Factory Board into 100% government-owned entities is a landmark event in the 245-year-old history of the board which received an annual budgetary support of over Rs 3,500 crore for its 76,000 permanent employees at 41 factories spread over 60,000 acres. OFB supplied products to the armed forces – a captive customer – on a nomination basis.

Because of this monopoly, there was no incentive for OFB to improve its quality of products and implement a dynamic system of getting customer feedback on both quality and delivery. Ordnance factories, meant to be the “fourth arm of defence”, lost their cutting edge and the trust of its customers over the years. They have been facing performance issues for a long time with concerns having been raised in various quarters over the last few decades regarding the functioning of OFB, which, according to its critics, lacks professional capacities that is visible in the cut-throat private sector where the motto is ‘perform or perish’. There was no clause for penalties on faulty or delayed deliveries.

In the 2016 Uri incident, the killing of 16 soldiers killed by Pakistani backed terrorists invited punitive strikes by India. Around the same time due to faulty manufacturing practices and storage, 17 soldiers were killed in Ammunition Depot in Pulgaon. The faulty ammunition manufactures weren’t penalised and instead the fault was placed on the Depot for improper storage.

The process demanded immediate recall by manufacturer on detection of faults and 100% replacement . However instead of destruction of faulty ammunition, the factory delayed collection to enable it to complete the shelf life of the ammunition. There were also serious concerns of over pricing for commercially purchased products for eg a truck was available commercially was delivered Ex Vehicle Factory Jabalpur at scaled up prices with no significant additions .

Similarly items like boots and clothing were not matching the standards available commercially with personnel preferring local market supplies to ordnance issues However corporatisation is no magic pill for the efficiencies expected from the new entities. The road ahead is arduous as merging the geographically diverse factories with differing work norms and cultures to publicly compete for its existence and market share is no easy task . It will demand further funding and support by the government.

The key lies in finding the right leadership to manage these corporations into dynamic entities that finds local solutions. An example can be found in the manner in which TATA motors underwent a transformation in the passenger car segment after its lacklustre performance with Indica after the acquisition of Jaguar Land Rover infusing their cars with the same innovations that drive the market. Until 2006 Bharat Forge was primarily an auto components firm.

Through mergers and acquisitions over the past decade, it has transformed into the world’s second largest forging company and has manufactured its own artillery guns and has its manufacturing base spread across 11 locations and 5 countries. Worldwide there have been efforts of consolidations leading to conglomerates – examples are Lockheed Martin, Raytheon, Northrop Grumman and Boeing all of which are a result of consolidation of the multiple companies in American Aerospace industry. Another example is creation of alliances and pooling resources by likeminded countries of which the Eurofighter is an example leading to reducing costs of maintaining large defence public sectors.

A major drawback faced for indigenisation of defence industries is that there is no roadmap of requirements. The industry is incapable of identifying and forecasting the needs of the Armed forces and invest in research and development for an item that may never be procured. Unless the defence service are able to identify the requirements for platforms and armaments, the MoD as well as the Indian defence industry will not be able to cater for these requirements.

Another step in making Atma Nirbharta a reality could be restructuring of the Department of Defence Production, currently catering to defence PSU and former ordnance factories, as Department of Indian Defence Industries and to cater for all private players in the defence industry. Such an umbrella organisation will be able to identity and meet the needs for indigenisation, collaboration, licensing and legislations for encouraging the defence industry.

The corporatisation of OF was a long-pending demand, however, its success depends on the users as well to make the indigenous entities capable on taking on the needs of the armed forces and truly ushers in an era of defence self-reliance under the Atma Nirbhar Bharat.



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