OFB Corporatisation: Government to launch 7 new defence firms carved out of OFB on October 15

The Ministry of Defence informed on October 11, 2021, that as part of the corporatisation of the Ordnance, the Government of India will formally launch seven new defence firms on October 15.

The move of launching 7 new defence companies out of the ordnance Factory Board came after the government issued an order of dissolving the OFB with effect from October 1, 2021. These new government entities will be producing ammunition, vehicles, explosives, weapons and equipment, among others.

The Defence Ministry also informed that these 7 new companies will have 66 firm contracts that are worth Rs. 65,000 crores from the three services and the paramilitary forces.

The Union Cabinet earlier had approved the corporatization of the Ordnance Factory Board (OFB) in order to boost its efficiency and effectiveness. OFB was the oldest and the largest industrial set-up that used to function under the Department of Defence Production of the Defence Ministry.

OFB split into 7 new Defence Firms: Key Highlights

•  As per the officials, all the indents that were previously placed on the Ordnance Factory Board by various services, CAPFs and State Police have now been converted into deemed contracts. These contracts numbering 66 have a cumulative value of more than Rs. 65,000 crores.

•  The process of dissolving the OFB was smoothly concluded after months of extensive consultations with all the stakeholders before the unveiling of the new defence firms.

•  A total of 60% of the annual price of the indents will be paid by the services to the new defence public sector undertakings as the mobilisation advance.

Why did government decide to form seven new Defence firms out of OFB?

The Ordnance Factories under the Ordnance Factory Board (OFB) was engaged in the production of tanks, mine-protected vehicles, armoured personnel carriers, rockets, bombs, anti-aircraft guns, artillery guns, small arms, parachutes, clothing and leather equipment for the soldiers.

The Central Government recently decided to dissolve the Ordnance Factory Board and split it into 7 new defence firms that will be professionally managed entities in order to increase their share in the domestic market through better capacity utilization and also for new export opportunities.

Various high-level committees, in the last two decades, had also underlined the need to improve the functioning of OFB.

Criticism of OFB corporatization

The factories that were controlled by the Ordnance factory Board employed at least 70,000 people who have been against the move to corporatise it.

The All-India Defence Employees Federation is also amongst the four workers association that has decided to boycott the inauguration of new companies on October 15. The Central Government, on the other hand, assured that there will be no change in the service condition of the OFB employees.

All the OFB employees (Group A, B and C) from different production units have been transferred to the corporate entities on deemed deputation for the initial period of 2 years without changing their service conditions.