The Ordnance Factory Board, responsible for manufacturing the bulk of the ammunition used by India’s Armed Forces and which dubs itself ‘the force behind the armed forces’, has come under fire by an internal Army report to the Ministry of Defence which points to lapses in the quality of its products and recommends reforms.
According to the report, 403 accidents have taken place due to poor quality of products by OFB, with 27 fatal casualties and 159 non-fatal casualties due to OFB manufactured ammunition and armament between 2014-20, in addition to a loss of Rs 960 crore from products disposed of “within shelf life”—an amount the Army says could have bought 100 155mm Medium Artillery guns.
“The sub optimal efficiency of this potential strategic asset is one of the major contributing factors to the hollowness threatening the ammunition and armament holdings of the Indian Army,” the report says.
The report says a “lack of accountability and poor quality of production results in frequent accidents” with one accident taking place every week on average.
“It is also a matter of concern that certain countries have refused to accept ordnance factory manufactured ammunition and equipment offered against Defence Lines of Credit due to concerns regarding quality of output, procedures in the factories and the in efficient post sale service.”
Corporatising the OFB—a move that stops short of outright privatisation—would aim to give it the status of a ‘Maharatna Public Sector Undertaking’ (PSU) and allow OFB to strike Joint Ventures with private firms. The resultant PSU would be 100 per cent government-owned but would have greater functional and financial autonomy. Calls to do so have been made for decades. From the T.K.A. Nair Committee to the Vijay Kelkar committee and the Raman Puri Committee, several experts have pitched for corporatisation—but the move often meets with opposition from OFB employees.
In June, over 82,000 OFB employees announced a strike after Finance Minister Nirmala Sitharaman doubled down on plans to corporatize the OFB even as it placed a Rs 1,056 crore order with the board for 156 upgraded BMP vehicles.
OFB employees fear that corporatisation would be a step towards privatisation, and cost layoffs and job cuts. However, the Army feels the move would improve its efficiency, lead to more competitive prices, and raise its value and growth prospects.
“Corporatisation of OFB is likely to wake it from its slumber and transform ordnance factories into a modernised, state of the art facility with flexible and better decision making in its functioning. This move is likely to make them more competitive and self reliant in production of arms and ammunition and convert it to a profit earning organisation within next few years,” the report says.
However, OFB employees feel that board has remained a departmental organisation for over 200 years due to the special nature of the defence industry, catering to volatility and non-uniform demand in ways like maintaining ‘war reserves’—the keeping of which would be commercially non-viable for a PSU or private industry.
However, the report notes that the government will need to consider the surge in demand during war when formulating laws for corporatisatin. “OFB will need to work at its maximum capacity and look for exports of its surplus capacities during peace time, which will necessitate it to become more efficient and produce world class quality to survive in this competitive world,” it says.
In September, the government constituted an Empowered Group of Ministers (EGoM) under the chairmanship of Defence Minister Rajnath Singh to oversee the process of corporatisation of the OFB.
