Arms factories restructuring for profits, employment: Rajnath
Observed Policies/Schemes

Arms factories restructuring for profits, employment: Rajnath


To increase the profitability of the entities for higher employment generation, the Central government determined to the corporatization of ordnance factories. This would also reduce the import dependency of defense equipment and would result in enhancing the combat efficiency of the armed forces, said the officials.

The decision to convert state-administered arms factories, which function directly under the Ordnance Factory Board (OFB) headquartered in Kolkata, into public sector enterprises has been taken after considering the advice of at least three committees formed in the past to monitor their functioning, said by The Defense Minister on Wednesday.

Around 82,000 workers employed with 41 ordnance factories.

The factory workers’ on 30-day strike against corporatization entered its second day on Wednesday.

The factories are ‘captive centers’ building products, including tanks, armored vehicles, artillery guns, small arms, and ammunition apart from costumes, tents, and boots. Most have been in existence for more than 200 years and supply material only to the Army and different Paramilitary Forces under the Home Ministry.

Though sources declared that the strike has the support of senior OFB officials, Bharat Pratiraksha Mazdoor Sangh (BPMS), one of the employees’ federations that have led the strike, informed that over 98% of Group A officers in the OFB were not joining in it.

On Wednesday, only about 5,000 deployed industrial workers were present on duty from a total work of over 76,000. BPMS General Secretary Mukesh Singh told IANS that the strike would continue till the government gives into our interest against corporatization.

According to the government, the ordnance factories do not function in a competitive environment and have over the years been marred by issues about the quality of products, high charges, lack of innovation and low productivity.

“The present structure of the board is inconsistent with the requirements of a production center, which needs a lot of flexibility at the managerial and functional levels. Decisions like the modernization of plant and machinery, entering into joint ventures or transfer-of -technology agreements are subject to government regulations. The board has no incentive to make profits. It cannot compete with private industries that have all managerial and technical flexibilities required for production and marketing activities,” said a Ministry official.

With a structure not favorable to maintain itself in the market, sources said the government forecasts the state-owned factories turning into the white elephant shortly unless emphasis is placed on private-sector defense production under the ‘Make in India’ drive.

Three different committees-the T.K.S.Nair Committee in 2000, the Vijay Kelkar Committee in 2004, the Raman Puri Committee in 2005-have advised improving the OFB to make the factories more competitive and market-oriented.

The committees recommended measures like giving Navaratna status to the OFB or splitting up the family of 41 factories to form three separate PSUs. The Present exemption is banking on the reports of these committees to go ahead with the corporatization of the OFB.

The employees’ federations, however, refer the cases of Bharat Sanchar Nigam Limited (BSNL) and Hindustan Aeronautics Limited (HAL) to support their argument that corporatization alone cannot lead to rising in competitiveness, revenues, and employment generation.

But the government emphasizes that corporatization will lead to greater perception for India in the defense export market and innovation for self-reliance in defense. It also claims that corporatization will result in timely delivery of products, better utilization of under-utilized measures, and greater versatility in technology, acquisition through overseas assets.

It also claims that corporatized factories may not need government funding for modernization and research, thereby helping the entities become financially self-sufficient.

The government plans to form strategic alliances of the factories with Indian and overseas companies and provide the board Chairman with a fixed tenure for efficient leadership and bold decision-making.



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