The Hindu Business Line : CAG highlights deficiencies in ordnance factories' functioning

THE Comptroller and Auditor-General of India (CAG) has highlighted shortcomings in the functioning of ordnance factories, following a performance audit of the manufacture of high calibre ammunition, critical to sustaining superior firepower.

In a recent report on Defence Services Ordnance Factories, tabled in Parliament, the CAG said of the total value of production of Rs 1,389 crore during 2003-04 for all types of Army ammunition, the value of production of five types of such ammunition viz. 155 mm, 130 mm, 125 mm, 120 mm and 105 mm, was Rs 893 crore, constituting 64 per cent of the total value.

The report said infrastructure for manufacture of ammunition at ordnance factories was created to achieve import substitution and provide reassurance to the Armed Forces as well as the people that the defence preparedness is safeguarded by supply of adequate quantity of quality ammunition at the right time.

Stating that ammunition is manufactured in two phases, it said in the first phase various components/sub-assembly of ammunition like empty shell, fuze, primer, cartridge case, propellant and explosives are produced. In the second phase, these components are filled and assembled into a complete round of ammunition.

Audit of performance of the ordnance factories manufacturing `five' types of high calibre ammunition between August and December 2004 reveals that though there was significant requirement of three types of ammunition, the Army placed insufficient orders on the Ordnance Factory Board.

The Board failed to control overheads, which led to substantial variation between prices of high calibre ammunition, fixed at the start of the financial year and those worked out with reference to the value of production. Examination of costing of completed rounds of ammunition adopted in two out of four filling factories showed that the prices charged to the Army were less than the actual cost by 11-44 per cent during 1999-2000 to 2003-04.

The CAG report said ammunition valued at Rs 1,746 crore pertaining to the period 2000-01 to 2003-04 was shown as physically issued, though its actual issue had spilled over to subsequent years. Thus, the accounts of the Board did not present "a realistic view of activities in the factories since Army had not received this ammunition during the year in which issues were shown to have been made," the report said.

It said the Army was saddled with three variants of unserviceable 125 mm ammunition valued Rs 706 crore awaiting rectification/replacement from four to eight years. This led to import of the ammunition worth Rs 317 crore during 1999-2003.

The report further noted that various established ammunition and components valued at Rs 235 crore were rejected by the quality assurance agencies during 1999-2005, while components valued at Rs 46.89 crore had to be imported during the same period.

Making a slew of suggestions, the CAG urged the Defence Ministry to ensure that Army Headquarters place demands on the Board for manufacture of ammunition taking into account the requirements of ammunition based on provision review and capacities created at ordnance factories. Army should also project demand every year only after taking into account backlog of outstanding orders.

The report recommends that the Ministry might ensure that the Board urgently devise a system whereby the actual physical issue of stores up to March of a particular year is only reported in all the records. The management of ordnance factory should clearly assess the capacity of each plant and machinery under various product lines so that the Board can allocate sufficient production target to ensure optimal use of plant and machinery of the factories.

The Defence Ministry might seek a review and upgradation of the internal quality control system of the Board so as to preclude rejection of ammunition during proof check.

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