Editorial: Right move, though belated

Corporatisation of Ordnance Factory Board will lead to greater autonomy, accountability

The 220-year old Ordnance Factory Board (OFB), India’s main producer of military weapons that controlled 41 ordnance factories, has just slipped into history. After a prolonged exercise that saw strong arguments both in favour and against corporatisation, the Board has been dissolved and its assets, the 70,000-strong staff and management are being transferred to seven newly established defence public sector undertakings with an assurance to continue the same service conditions and employment security. Still, there are apprehensions among the employees that the move was the beginning of a process towards privatisation. However, there has been a long-pending proposal to restructure the defence ministry entity that has been supplying critical arms and ammunition to the three armed forces and the paramilitary. There is no denying the fact that the OFB’s monopoly has led to stifling innovation, apart from low productivity, high costs of production, and lack of flexibility at the higher managerial levels. Bureaucratic lethargy and inability to read the market dynamics have been the big stumbling blocks. Functioning directly under the Ministry of Defence, the OFB and its factories could not retain profits, and had no incentive to work towards increasing them. The country can ill afford the burden of underperforming entities, hiding their inefficiencies under the garb of being defence establishments, firewalled with protectionism to avoid accountability. Time has come to reform or become redundant. Archaic organisational structure, exorbitant production cost, absence of technological innovation and lack of professionalism and accountability have proved to be the bane of the OFB which enjoys a monopoly over products required by the armed forces.

The decision to restructure and corporatise the OFB, while protecting the rights of the workers, will lead to greater autonomy, accountability and efficiency in ordnance suppliers. In fact, no major power in the world can modernise without the participation of private players in defence manufacturing, because no government can afford it, all by itself. The public-private partnership, shared R&D, government-owned commercially operated model, facilitating collaborations by increasing the FDI limit from 49% to 74% and transfer of technology are steps towards self-reliance in defence manufacturing. Though belated, the government took the right decision to open up the defence sector to private players, allowing the armed forces to procure comparatively better products at competitive rates. Considering the strategic environment and needs of the country at a time when China-Pakistan nexus poses a potential two-front engagement scenario, reforms in the defence sector are inevitable. The corporatisation of OFB, involving the restructuring of the apex organisation, forging collaborations, flexibility in technology acquisitions, financial independence and increasing productivity, is expected to transform ordnance factories into self-reliant and competitive entities.