Govt to form high-level panel for recommending contours of reform in ordnance factories

The government will appoint a high-level committee to recommend restructuring of the nearly 200-year-old Ordnance Factory Board which operates 41 ammunition production facilities across the country, official sources said on Wednesday.

The defence ministry has already taken an in-principle decision to reform the OFB with an aim to bring in professionalism and significantly enhance its productivity.

Upset over the move, around 43,000 employees of the OFB began a month-long strike from Tuesday, arguing that the defence ministry has "arbitrarily" decided to convert ordnance factories from a government department to a corporation or a public sector undertaking.

"A high-level committee will be appointed soon to recommend restructuring of the OFB," a source said.

The OFB functions under the department of defence production of the ministry of defence.

Reforming the OFB was one of the key focus areas for the defence ministry in the first 100 days of the Modi Government's second tenure.

"The government wants to make the OFB a world-class entity for which it plans to take several steps," the source said.

At present, the government has to shell out around Rs 5,000 crore annually to pay salaries of the OFB employees. Additionally, it gives around Rs 3,000 crore to OFB as operational cost.

The ordnance factories were set up as "captive centres" to serve the needs of the armed forces, but they have been facing performance-related issues for a long time.

"Concerns have been raised in various quarters over the last few decades, regarding the functioning of OFB which lacks professional attitude as is required from a production organisation like OFB," a senior defence ministry official said.

The defence ministry said present structure of OFB is inconsistent with the requirement of production centre which calls for lot of flexibility at managerial and functional level.

The decisions like modernisation of plant and machinery, entering into joint venture with other companies, entering into transfer-of-technology agreement are all subject to government regulations and instructions, reducing the leverage and flexibility of any dynamic production and marketing unit, the official said.

As a Government department, OFB cannot retain profits and, therefore, has no incentive to make profits, he said.

As a whole, OFB in its present structure of departmental organisation may not be appropriate for carrying out production activities and standing in competition with its competitors in private industry, the official said.