Explained: Dismantling the Ordnance Factory Board

What is the news?

The government has decided to dissolve the Ordnance Factory Board (an umbrella body of 41 ordinance factories), which was set up in 1801. All of its units like staff, assets, others will be corporatized under 4 PSU’s.

About the defence committees and OFB

Various committees in the past were constituted for the purpose of defence reforms. Corporatization of OFB was recommended by TKS Nair Committee (2000), Vijay Kelkar Committee (2005), and Vice Admiral Raman Puri Committee (2015).

There is another committee under setup under Lt Gen D B Shekatkar, which did not suggest corporatization. Instead, it recommended regular audits of all ordnance units, considering past performance.

Why does the government favours corporatization of OFB?

According to Government, corporatization of OFB will lead to improvements in efficiency, make products cost-competitive, and enhance their quality. Further, It will also help to overcome various shortcomings in the existing system and provide these companies opportunities in the market, including exports.

What are the arguments against corporatization?

According to Employees, “corporatization was a “move towards privatization”. They expressed fears that a corporate entity would not be able to survive the unique market environment of defence products with its unstable demand-supply dynamics.

Also, the employees fear losing their job.  Employees also argue that ordinance factories are innovative, and have repeatedly proven their worth as a “war reserve”. So, the government step towards corporatization is good news for private corporations and foreign arms manufacturers and not for Indian Ordinance factories.

Source: This post is based on the article “Explained: Dismantling the Ordnance Factory Board” published in Indian Express on 30^th September 2021.