Ordnance Factory Board Corporatisation
Source : Eonomic Times
GS III : Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures

Why in News ?

An overhaul of the Ordnance Factory Board (OFB) has been cleared set to be split into seven companies to improve productivity and create specialisations in weapons manufacturing.

Key Facts

• The long pending plan which was mooted almost two decades ago was cleared by the Union Cabinet.
• It will lead to greater accountability and efficiency of the 41 factories that operate under the OFB banner.
• It aims as part of a package to make India self reliant in defence hardware production.

  

• The board will now be split into seven entities owned by the government.
• All combined will produce ammunition and explosives, vehicles, weapons and equipment, troop comfort items, opto-electronics gear, parachutes and ancillary products. 
• Move would provide these companies with autonomy as well as help improve accountability and efficiency.
• An empowered group of ministers (EGoM) constituted under the defence minister Rajnath Singh last year will oversee the board’s corporatisation and also take decisions on related matters.

Need for Ordnance Factory Board Corporatisation

• Currently manufacture tanks, armoured personnel carriers, mine protected vehicles, bombs, rockets, artillery guns, anti-aircraft guns, parachutes, small arms, clothing and leather equipment for soldiers.
• There have been complaints from the defence forces that the quality of products manufactured by the OFB were substandard.
• The Indian army in an internal assessment had flagged concerns about faulty ammunition and armaments supplied by the OFB causing casualties and causing wastage of public finances.
• The Comptroller and Auditor General had repeatedly raised questions about the quality of products supplied by the OFB and its overall performance in its reports.

How this transformation helps ?

• The restructuring will transform the ordnance factories into productive and profitable assets.
• Also deepen product specialisation, boost performance and improve quality, cost efficiency and accountability.
• This major move towards will helps to achieving self-reliance in defence manufacturing.
• As a result of this these companies will become professionally managed entities and will increase their share in the domestic market as well as tap new export opportunities.
• Help overcome various shortcomings in the existing OFB set-up by eliminating inefficient supply chains and provide these companies incentive to become competitive.
• As a result it will boost their autonomy too.

Challenges Ahead

• Worker’s Issue : The decision last year met stiff resistance from workers’ unions. Three groups of workers had given a joint strike notice last August against the government’s plans to corporatise the board. 
  • There would be no change in the service conditions of the OFB employees and the government was committed to safeguarding their interests.
  • The pension liabilities of the retirees and existing employees will continue to be borne by the government.
• Leads to lesser government control over the corporation also there is a fear of job loss.

Indian Arms Trade balance

• India emerged as the second-largest importer of arms transferred between 2016-20, with a share of 9.5% of global arms imports.
• Russia has been the worst hit by India’s decreased share, although it still ranks as the subcontinent’s largest arms supplier.
• India’s goal seems to have been to cut its dependence on other countries for defence systems.
• To promote indigenous defence manufacturing and export, with the target of increasing the sector’s turnover to US$ 25 billion, including US$ 5 billion from exports, by 2025.
• India to continue to keep its defence imports in check, it must invest in domestic capacity building, innovation, and joint collaborations.

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