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Corporatization of Ordnance Factories Board: Its time should have long come

Efforts to transform OFB into a globally competitive entity have yet again started on a previous note with same disastrous consequences as a corollary.

July 24, 2020 / 09:00 AM IST
Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman

Interesting non-pandemic developments do occur during difficult Covid times. Such developments can span from miseries of individuals and institutions to states and the globe. While the states do confront such challenges, as part of regular considerations in aspects of governance, most appropriately on pandemic management, they may also face challenges of addressing issues that they may not have liked in these times, although such problems are an inherent part of national governance. An interesting case in India that deserves our attention now – corporatization of Ordnance Factories – an issue whose time should have long come.

Consider the threads of a single issue during Covid times: a) Honorable Finance Minister Nirmala Sitharaman, on 16 May 2020, announced corporatization of Ordnance Factories (hereafter, OFB) with an eye on autonomy, accountability and efficiency in order to achieve grand strategic objective of making India self-reliant in defence; b) considerable deliberations by affected parties as a corollary – All India Defence Employees Federation (AIDEF), Bhartiya Mazdoor Sangh (BMS) and others – during such times and gearing up for a nationwide strike on 28 July 2020 in opposition to this decision; and c) a logical follow up of administrative measures of the government decision to its conclusion in coming times as part of the reform process in Ordnance Factories (OFs).

Ex-employees of OFB, in their decision to oppose corporatization efforts by the government, have brought the Expression of Interest (EOI)-cum-Request for Proposal (RFP) into question before the Central Vigilance Commission, and sought answers. This complaint is based on a 30 page complaint titled “Gross Irregularities cum RFP Document of DPP for Corporatization of the OFB”, submitted by the employees to the CVC on 20 July 2020.

The EOI-cum-RFP document, asking for engagement of a suitable Indian consulting firm to propose steps for a broad set of reforms, administrative and structural rearrangements along the lines of a corporate entity. Although a suitable consultant is yet to be found out, in all probability the eventual winner would be one of the Big Four (PwC, E&Y, Deloitte and KPMG) consulting firms (all of which are multinationals with Indian branches with Indian characteristics), the approach to reform OFB into a globally competitive arms manufacturing entity is ideationally flawed and practically non-productive, to say the least.

Ideational flaws are embedded in OFB’s a dual historical narrative: a) OFs, the oldest among the Indian arms producers (mostly privately owned during pre-British times like Walchand Hirachand or Garden Reach or Mazagaon Docks except for 16 OFs till Indian independence) have always been sandwiched between the government of the day (British Administration during pre-independence and Indian Government thereafter) and the customers – Indian Army, State Police and Para-military Forces – and the prime customers; and b) OFB’s perception-led non-performance and hence pilloried since 1940s have reduced it to an obedient entity rather than a proactive innovator and producer.

There is an interesting customized cultural distinction that distinguishes OFs from DPSUs – while the former equally caters to oftentimes impractical demands from all clients and in the process being victims to whims and fancies of two gigantic ministries (MoD and MHA) that are oftentimes at loggerheads than in tandem, most of the other DPSUs are lucky to escape the wraths of their prime clients. This way, OFB and HAL (to a large extent) are on the same boat as pilloried boys of Army and Air Force respectively, while DPSUs like Mishra Dhatu Nigam Limited or Bharat Electronics or Bharat Earth Movers Limited have the luxury of diluted wraths as not only they cater to a diversified clientele but more importantly they can maneauvre diktats from babus in the MoD unlike their OFB and HAL counterparts.

Structurally, OFB, along with other DPSUs, is a victim of a masterly manipulated system that is so embedded into a tightly controlled operational mechanism (to some extent, this could be due to a contested civil-military relations domain, where the civil side dominates for all practical purposes) that even a small step toward a particular reform within its administrative structure would invariably meet stiff resistance. It is not for nothing that an avowal from the Finance Minister has evoked so much anger within the OFB!

Ideationally and structurally, OFB or for that matter all other DPSUs should have been truly independent entities so that they could find their own feet in the ubiquitous world of arms manufacturing. State control should have gone in a phased manner to enable them to be globally competitive. India walked in the opposite direction and the results of performance of state-owned arms producers are there for all to see. They not only suffer from ideational confusion but also have been a victim of structural complexities.

Corporatization of OFB, whose noble intents should not be in doubt, is a step that should have been carefully crafted and implemented by the MoD. Instead, wise efforts by the MoD to reform it will only delight the paid consultant, anger the employees with protests and resultant protests, keep the structural complexities with overwhelming babu dominance intact and keep the producer (OFB), designer (DRDO) and customer (Military, Para-Military and Police Forces) distinctly distant from each other.

The author is Vice President at the Society for the Study of Peace and Conflict (SSPC), New Delhi. Views are personal. He can be reached at /

Deba Mohanty
first published: Jul 23, 2020 04:55 pm