Mrs Nirmala Sitaraman, Hon’ble Minister of Finance, announced the Corporatisation of Ordnance Factory Board (OFB). This is a long pending Reform.
Today, the 41 ordnance factories under the OFB are spread across 26 different locations in the Country. These factories manufacture a wide spectrum of products from weapons (small calibre, mortar equipment, medium and large calibre), ammunition (small medium and large calibre, mortar bombs, grenades, signalling smoke, rocket bombs, demolition, explosives, propellants and chemicals), vehicles (armoured and transport), clothing, general stores and equipment for the defence services and the Para Militart forces. <\/p>\n\n\n\n
Due to the fact that Armed Forces & Para military forces have been captive customers, OFB lacked the professional attitude as is required from a production organisation. There was hardly any incentive to improve quality of its products. A dynamic system of getting customer feedback on quality and timely delivery issues was lacking . The Services have been constantly complaining about quality issues in OFB products and also the high cost of products due to high overhead charges in the OFB, including high maintenance charges, high supervisory and indirect labour charges. <\/p>\n\n\n\n
The Standing committee on Defence and various CAG Reports have been critical about the OFB.On its part the OFB, functioning under the Dept of Defence production, was also constrained by the rules & regulations of the Government. Therefore decisions for major acquisitions, modernisation of plant and machinery, entering into a joint venture with other companies, entering into a ToT (transfer of technology) agreement etc, all are subject to government regulations and instructions. This naturally leads to reduction in the leverage and flexibility which any dynamic production and marketing unit requires. Also as a government department, the OFB cannot retain profits and therefore has no incentive to make profits. Thus the OFB in its present structure of departmental organisation is not appropriate for carrying out production activities in an efficient, economic & effective manner. Various committees in the past have recommended Corporatisation of the Ordnance Factories notably the TKA Nair Committee(2000) as well as Vijay Kelkar Committee (2004).<\/p>\n\n\n\n
Continuing the Ordnance Factories in the current structure would also certainly prove financially and strategically costly for the users and consequentially for the country\u2019s defence preparedness itself. Thus it is an absolutely necessary & urgent Reform. And, it may be stated that Corporatisation does not mean privatisation. The formation of a corporation would ensure that the ordnance factories get the requisite functional autonomy and are made accountable and responsible for their operations and performances to shareholders. Listing the corporatised OFB on the bourses will offer investors an opportunity to own shares in an important segment\/ niche company.<\/p>\n\n\n\n
But the success of Corporatisation of OFB would depend a lot on the policy decisions of the government in terms of funding, order flow and bureaucratic control. Once these are appropriately framed & implemented, Corporatised Ordanance Factories can play a pivotal role in the Atmanirbhar Bharat by carving out a niche in the domestic market. Increased exports can also lead to increased share in the international arms market.<\/p>\n\n\n\n
Such organisation restructuring, monetisation and valuation of assets and preparation of the business model requires expertise. A professsional agency, free of pulls and pressures, should be identified on a Quality cum Cost Based System to undertake this humongous task in a definitive time period. <\/p>\n","protected":false},"excerpt":{"rendered":"
Mrs Nirmala Sitaraman, Hon’ble Minister of Finance, announced the Corporatisation of Ordnance Factory Board (OFB). This is a long pending […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[46,25,23],"tags":[128,102,51,129,127,104],"yoast_head":"\n