Ordnance Factories corporatisation : Decision historic, courageous, and bold, it still remains to be seen whether it would serve the purpose and achieve the objective

KOLKATA 18 OCT: By now, it is perhaps known to everybody that Government of India (GOI) has abolished the Ordnance Factory Board (OFB) and converted its 41 Ordnance Factories into seven 100 per cent government-owned Defence Public Sector Undertaking (DPSU) units from 1 October 2021.

Though the employees and officers of OFB and the Factories have expressed displeasure over this decision to abolish this age old Organisation, most experts have hailed the decision of the Modi Government as historic, courageous, determined and a bold reformative step in the right direction.

Over the years, right from V P Singh Government, it has been in the radar of the Union government to modernise the Ordnance Factories and since then, a number of expert Committees have been formed and recommendations submitted. During all these years, there seem to have been consensus on one issue that everything is not right with the Ordnance Factories. However, the remedies suggested by various Committees have differed though most of the recommendations have not been made public. Even slightest hint from the incumbent government suggesting changes to be made in the functioning or formation of OFB used to invoke vehement protest and opposition from various political parties. Understandably, any Government, which is dependent on support of its allies for survival, could not afford to antagonize its allies. Therefore, the status quo continued. It took a single party majority Government, that too, in its second term, to take the decision to do something with the Ordnance Factories. In a sense, this is certainly a historic and courageous decision given the fact that nobody could do it in the past though they wished they could. Only time will tell whether it is reformative or enough has been done.

It was first suggested by the T.K.S. Nair Committee in 2000, the Vijay Kelkar Committee in 2005, the Raman Puri Committee in 2015 Corporatisation of OFB formed part of the BJP government’s ‘167 transformative ideas’ to be implemented in 100 days of its second tenure, i.e. by October 2019. Modi Government set the ball rolling as soon as they returned to power in June 2019 and started the initial discussion with the stake holders. However, on 20 August 2019, around 80,000 workers of the 41 factories of the Ordnance Factory Board (OFB) went on a month-long general strike after talks between the Trade Unions and the Centre on the proposed corporatization failed. This strike was called off on August 26, 2019, only after assurances by the secretary, defence production that the government had not taken any decision yet towards corporatization of OFB. Centre appeared to have retreated. During the COVID pandemic, in May 2020, Finance Minister (FM) Nirmala Sitharaman unveiled tranches of financial package as part of PM’s Atmanirbhar Bharat Abhiyan. During the presentation of the fourth tranche, on 16 May 2020, the FM announced the decision of the government to `improve autonomy, accountability and efficiency in Ordnance Supplies by corporatization of Ordnance Factory Board.’

Modi Government was waiting for the right opportunity. It surely shows their seriousness and determination to purse corporatization of OFB.

Subsequently, the cabinet committee on security (CCS) in its meeting held on 29 July 2020, approved 2 to convert OFB into one or more than one 100% Government owned corporate entities, registered under the Companies Act 2013. Further it was decided to constitute an empowered Group of Ministers (EGoM) under the Chairmanship of Minister of Defence(MOD) to oversee and guide the entire process of corporatisation of OFB, including transition support and redeployment plan of employees while safeguarding their wages and retirement benefits.

On 10 September 2020, department of defence production (DDP), Ministry of Defence, the controlling Department of OFB engaged KPMG Advisory Services Pvt. Limited, lead consortium member, with Khaitan & Co. Ltd. as consortium member, as the consultancy agency to advice the Department on corporatization .

According to the advertisement 4 published by DDP for selection of the consultant, `the project will consist of 2 phases of approximately six months each. In the first phase, the overall strategy, vision and operating model along with financial and legal implications and detailed roadmap for implementation will be outlined by the consultant.

In the second phase, the consultant shall support in implementation, project management through the entire project roadmap and co-ordinate and monitor the progress of the corporatisation process and until it’s completion. The Consultant will also assist the DDP in presenting matters before the Empowered Group of Ministers (EGoM)’.

On 16 June 2021, the Union Cabinet approved a plan to corporatise the OFB, which has 41 factories, into seven fully government owned corporate entities on the lines of defence public sector undertakings (DPSU). An Empowered Group of Ministers (EGoM), already set up under the chairmanship of the Defence Minister, would decide upon the matters related to implementation and review any issues arising from time to time. to thwart any possible agitation or call for strike, which caused failure of the earlier attempt of the Government in 2019, on 1 July 2021, an Ordinance was notified that prohibited employees engaged in essential defence services from taking part in any agitation or strike, the Ordinance was later passed during monsoon session of the Parliament as The Essential Defence Services Act, 2021.

Notice the timeline here. Modi Government included corporatisation of OFB in the government’s ‘167 transformative ideas’ to be implemented in 100 days of its second tenure and started the process through the bureaucratic channel as early as June 2019 which failed miserably. The political leadership waited for the right opportunity and during the presentation of financial stimulus packages during the COVID pandemic, in less than a year, surreptitiously conveyed their intention to corporatise the OFB. It did not stop there. Before end of July 2020, the CCS approved conversion of OFB into one or more than one 100% government owned corporate entities. But the bureaucracy returned to the Cabinet for final approval, almost a year later, in June 2021 though the DDP asked the selected Consultant to complete Phase-I of their work in 6 months. Even then DDP took another 3 months to finally spell out its intention of creating 7 DPSUs on 24 September 2021 6 . And they could not take any decision on the schools and hospitals under OFB. It is a pity that the Bureaucracy in DDP could dare to propose to keep the hospitals idle in this pandemic era and could get away with an approval for the same.

Efficient bureaucracy!!!

During the fifth tranche of financial stimulus package, on 17 May 2020, the FM presented 7 that government will announce a new policy whereby list of strategic sectors requiring presence of PSEs in public interest will be notified; in strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed and in other sectors, PSEs will be privatised (timing to be based on feasibility etc.); to minimize wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four and others will be privatised/ merged/ brought under holding companies. This announcement was further formalised during the budget speech in the Parliament on 1 February 2021 where the FM informed 8 that the Government has approved the policy of strategic disinvestment of public sector enterprises wherein, in strategic sectors, there will be bare minimum presence of the public sector enterprises. The remaining CPSEs in the strategic sector will be privatised or merged with other CPSEs or closed. Surprisingly though defence was listed as strategic sector, the number of CPSEs or PSUs was not specified in the budget speech though it was earlier indicated in May 2020 to be one to four.

The intention of delving into what FM said in May 2020 or February 2021 is to highlight how the Bureaucracy is scoring a self-goal. As it is OFB had 5 production verticals: (i) Armoured Vehicles, (ii) Weapons, Vehicles & Equipments, (iii) Materials & Components, (iv) Ammunitions & Explosives and (v) Ordnance Equipments (Clothings, tents, etc.). This arrangement has been going on since formation of OFB in 1979.

During corporatization, DDP split these verticals further and created 7 DPSUs, one of which has only 1 factory and another only 3 factories. Was the intention of the bureaucrats in DDP to listen to the consultants or just serve the Government with the old wine in new bottle? So, through this long delayed exercise, the bureaucrats in DDP split 5 verticals of erstwhile OFB into 7 DPSUs, in contravention to the declared policy of the Government of minimising the presence of PSUs in strategic sectors. And the funniest part of the story is that DDP already has 9 DPSUs.

This is not the first time the Modi Government has been let down by the stiff necked. Bureaucracy and neither will it be the last time, if suitable corrective steps are not taken.

Bureaucracy is turning out to be the ‘Achilles heel for Modi Government’. Every failure, every criticism, every mishap can be linked with inefficiency of the bureaucracy though none from the government has blamed them in as many words. The political leadership has faced the criticism, has answered the opposition in the parliament but never blamed the bureaucracy in public, which is quite laudable.

41 Ordnance Factories under OFB were established over a period of time, the first one in March 1802 and the last one in December 2007. Similar type of factory has been established in different geographical location, primarily due to strategic reasons and to a large extent, political reasons. The push for corporatisation was to improve efficiency without any political compulsion (which has been taken care of by the political leadership). Instead of consolidating the production units as per modern industrial production norms where the components are manufactured within a nearby geographical location, DDP Bureaucracy has succeeded in fooling the political leadership in accepting their proposal for continuing with the dispersed distribution of the factories of each group and expecting that it would contribute to improved efficiency, productivity and cost reduction. Ridiculous!!!!

Though the decision is historic, courageous, determined and bold, it still remains to be seen whether it would serve the purpose and achieve the objective which the political leadership has yarned for. In a democratic set up like India, the political leadership can guide, mandate and convey their decisions but implementation and execution lies with the bureaucrats. The political leadership deserves applaud for this bold decision of corporatization of OFB but prima facie, the bureaucracy has so far came out second best in executing and implementing the decision of the cabinet. Hopefully, the Government will realise it sooner than later and take corrective measures before the DDP bureaucracy muddies the water more.

(The writer is working as a government employee and does not want to share his identity )

Please follow and like us:

Leave a Reply

Your email address will not be published. Required fields are marked *