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Explained | The dissolution and corporatisation of Ordnance Factory Board

The OFB, from October 1, will be split into seven new defence PSUs, namely Munition India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited, and Gliders India Limited.

September 29, 2021 / 05:19 PM IST
The MBT Arjun Mk-1A has been designed and developed by Combat Vehicles Research and Development Establishment (CVRDE), along with other laboratories of DRDO within two years (2010-12), said the defence ministry. (Representative image: Reuters)

The MBT Arjun Mk-1A has been designed and developed by Combat Vehicles Research and Development Establishment (CVRDE), along with other laboratories of DRDO within two years (2010-12), said the defence ministry. (Representative image: Reuters)

On September 28, the centre issued orders which announced the dissolution of state-owned arms manufacturer Ordnance Factory Board (OFB) from October 1. With this, an organisation that traces its roots back nearly 250 years, will cease to exist in its current form.

The OFB, which manufactures everything from tanks and armoured vehicles to rifles, ammunition and clothing for the armed forces, will see its 41 factories, assets and 70,000 employees split into seven new public sector units, an official order said, adding that OFB has an annual turnover of around Rs 19,000 crore.

The name of the seven new defence PSUs are Munition India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited and Gliders India Limited. These companies will be 100 percent state-owned.

While in its current form, the OFB was established in 1979, it can trace its genesis back to the establishment of Board of Ordinance in 1775 in Fort William, Kolkata, then the base of the East India Company's Bengal operations.

Why and how was this done?

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The centre’s decision to dissolve OFB was first announced by Finance Minister Nirmala Sitharaman as part of her ‘Aatmanirbhar Bharat’ set of announcements in May 2020. The idea was to improve autonomy, accountability and efficiency in ordnance supplies by dismantling the public sector behemoth into smaller, better managed companies.

In a meeting of the Cabinet Committee on Security in July 2020, the decision was ratified and the process began.

An Empowered Group of Ministers (EGoM) was set up under the chairmanship of Defence Minister Rajnath Singh to oversee and guide the entire process of corporatisation of OFB, including transition support and redeployment plan of employees while safeguarding their wages and retirement benefits.

Over the past 16 months, the centre has held multiple talks with employees’ associations of OFB. There has been opposition by staff and three recognised employees’ federations threatened an indefinite strike last year unless the centre’s decision was reversed.

In the meetings, including with Singh, the OFB employees sought a last chance to improve OFB performance while continuing in the present set-up for some more years and that their interests be protected.

What assurances have employees been given?

The centre has said that all the employees of OFB (Group A, B & C) of facilities being handed over to the new PSUs would be transferred on terms of foreign service without any deputation allowance initially for a period of two years from the appointed date.

Meanwhile, the employees of OFB head office in Kolkata, the New Delhi Office, and schools and hospitals run by OFB would be transferred to the Directorate of Ordnance Factories (to be formed) under the Department of Defence Production, initially for a period of two years from the appointed date.

“Till such time the employees remain on deemed deputation to the new entities, they shall continue to be subject to all rules and regulations as are applicable to the central government servants,” the Minister of State for Defence Ajay Bhatt had informed Rajya Sabha earlier this year.

Their pay scales, allowances, leave, medical facilities, career progression and other service conditions will also continue to be governed by the extant rules, regulations and orders, as are applicable to the Central Government servants, he had said, adding that pension liabilities of the retirees and existing employees will continue to be borne by the government.
Arup Roychoudhury

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