Addressing a long-pending reform, the Union Cabinet has approved a plan to corporatize the Ordnance Factory Board (OFB).

Ordnance Factory Board (OFB)

• OFB consisting of the Indian Ordnance Factories is a government agency under the control of the department of defence production (DDP).
• It is engaged in research, development, production, testing, marketing and logistics of a product range in the areas of air, land and sea systems.
• OFB comprises 41 ordnance factories, nine training institutes, three regional marketing centres and four regional controllers of safety, which are spread all across the country.

Why are OFBs significant?

• OFB is the world’s largest government-operated production organization and the oldest organization in India.
• It has a total workforce of about 80,000.
• It is often called the “Fourth Arm of Defence” and the “Force Behind the Armed Forces” of India.
• OFB is the 35th largest defence equipment manufacturer in the world, 2nd largest in Asia, and the largest in India.

Why corporatization?

• Once implemented, the OFB, the establishment of which was accepted by the British in 1775, will cease to exist.
• It is a major decision in terms of national security and also make the country self-sufficient in defence manufacturing as repeatedly emphasized by PM.
• This move would allow these companies autonomy and help improve accountability and efficiency.
• This restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepening specialization in the product range, enhancing competitiveness, improving quality and achieving cost efficiency.

Adhering to past recommendations

• There have been several recommendations by high-level committees in the past for corporatising it to improve efficiency and accountability.

What about employees?

• All employees of the OFB (Group A, B and C) belonging to the production units would be transferred to the corporate entities on deemed deputation.
• The pension liabilities of the retirees and existing employees would continue to be borne by the government.

How would this be accomplished?

• The 41 factories would be subsumed into seven corporate entities based on the type of manufacturing.
• The ammunition and explosives group would be mainly engaged in producing ammunition of various calibre and explosives, with huge potential to grow exponentially.
• Similarly, the vehicles group would mainly engage in producing defence mobility and combat vehicles such as tanks, trawls, infantry and mine protected vehicles.

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