Group of Ministers to take call on corporatisation of ordnance factories

A Group of Ministers is going to take a call on the proposed corporatisation of the Ordnance Factory Board.

“A Group of Ministers will soon take a call on the contours of corporatisation of these factories. These factories will be clubbed together based on the nature of manufacturing from each unit to avoid overlaps,” an official in the know told BusinessLine.

The Indian Ordnance Factories organisation is a family of 41 ordnance factories under the aegis of its corporate headquarters, Ordnance Factory Board, Kolkata.

Grouping

According to sources, the individual factories will be clubbed based on similarities in operations and nature of output to avoid overlaps. These sub-groups will form the broad framework under which the existing ordnance factories will be transformed into Defence Public Sector Undertaking (DPSU) companies.

“Presently, the Ordnance Factory Board is a department under the Ministry of Defence. This results in a delay in decision-making as it requires more approvals from the Government of India for operations. The idea behind corporatisation is to usher in a culture similar to other Defence Public Sector Undertakings of the country,” said an official.

Broadly speaking, the initial intention will be to group Ordnance factories based on parameters — for example, those exclusively making ammunition can be grouped and hived into a separate DPSU. The initial grouping will also be focussed on segregating the books of accounts and improving efficiencies.

Privatisation concerns

Meanwhile, trade union representatives of employees at the Ordnance Factory Board say the corporatisation would open more avenues for privatisation of the factories. “It is expected that once corporatisation has happened, there would also be partial disinvestment and privatisation of the factories. This is a matter of concern for the employees,” said a trade union representative said.

On whether corporatisation would also lead to privatisation, the source said, “That will be a call for the then DPSU boards to take.”

Weapons export

It is also expected that corporatisation of OFB can increase avenues for weapons export from India.

“Exports, a key indicator of the global competitiveness of any enterprise, are currently about 1 per cent (₹132 crore) of turnover of OFB. From the export performance of OFB, we observe that though OFB produces a variety of items, its basket of exports primarily comprises a only few items,” said a Defence Ministry official.

“OFB needs to aggressively market wider products in more countries. There are tremendous business opportunities for OFB products in Association of Southeast Asian Nations (ASEAN), the Middle East, Africa and the Commonwealth of Independent States (CIS) as is evident from the interest shown by countries in these regions during DefExpo and other defence exhibitions,” the official added.