The issue of corporatisation of the OFB has raised the anticipated storm of protests. Over 80,000 employees, attuned to an easy life, with no accountability whatsoever, are up in arms. However, a political party is given an overwhelming mandate by the people of a country in order to empower them to engineer change and harness rapid progress. It’s also apparent that the government is keen to put the reforms through. The author explains the multiple facets of the issue.
The clarion call given by the Prime Minister on 12th May for a “Self Reliant India” amidst the Covid 19 crisis and the announcement by Finance Minister Nirmala Sitharaman on 16 May that the Ordnance Factory Board (OFB) would be corporatized could be a welcome change. However, since she also mentioned that it did not mean privatization and the corporatized OFB will remain under government control, indirectly implying Ministry of Defence (MoD), leads to inferences that nothing is likely to change.
Ordnance Factories are the oldest and largest organization in India’s defence industry with a history that dates back to 1787. There are 41 Factories divided under five clusters or operating groups which are supposed to produce a range of arms, ammunition, weapons, armoured and infantry combat vehicles, and clothing items including parachutes for the defence services. They function under the Ordnance Factory Board (Board) which is under the administrative control of the Department of Defence Production of the MoD.
Multiple government-appointed committees in the past suggested corporatizing OFB to include: TKA Nair Committee recommended converting OFB to Ordnance Factory Corporation Limited in 2000; Vijay Kelkar Committee also recommended corporatization of OFB with ‘Navratna’ status, like BSNL in 2006; and finally, Vice Admiral Raman Puri Committee (2015) recommended corporatizing OFB and splitting it into 3-4 segments – each specializing in distinct areas like weapons, ammunition and combat vehicles. The reason for committee after committee coming up with these recommendations have been the inefficiency and poor quality with time delays in delivery of item that has been ordered. However, no government or the MoD paid any heed to any of these recommendations despite the fact that huge resources were expended by these committees to come to these conclusions. So, why did we order these committees, if we were not to take any action on the same?
The CAG, year after year has brought out glaring shortcomings in the efficiency levels of the OFB. In its Report Number 19 of 2016 it brings out “Ordnance Factory Project Korwa was given the sanction (October 2007) by the Government of India, Ministry of Defence for manufacture of 45,000 carbines(which Indian Army needed to the tune of 1.8 lakhs) per annum at an estimated investment of “408 Crore”. This project was brought in by Mr Rahul Gandhi to his constituency. “The time schedule for implementation of the project was initially fixed as October 2010, which, on Congress losing the elections was revised to March 2017. Even after expenditure of 1253 crore, the project had not accrued any benefits to the Board”. Which actually meant that not a single item has been produced since then.
The story of Ordnance Parachute Factory Kanpur (OPF) Kanpur is even worst. OPF manufactures various parachutes for the Armed Forces. Users’ requirement of parachutes is of significant importance because of their strategic use in dropping fully kitted soldiers, supply drop, emergency escape of pilots from aircraft etc. In the audit conducted at OPFand OFB for 2012-13 to 2016-17 on production of 11 selected parachutes for the Army and Air Force to ascertain whether OFB supplied quality parachutes to the users in time and as per their requirements, glaring shortcomings were reported. “There were deficiencies in production planning like delays in holding target fixation meetings, non-identification of item-wise production capacity and production constraints/capacity shortage not highlighted in the meetings for fixing realistic targets. The targets were routinely revised downwards due to OPF’s inability to meet the target because of non-availability of quality metal components/fabrics etc. Out of 49 instances analysed, OPF achieved production targets only in five instances during 2012-13 to 2016-17”.
As a result, there were significant outstanding orders for nine parachute items as of March/April 2017. The users’ also had deficiencies of seven parachute items to the extent of 33 to 100 per cent. Bulk production of two types of Heavy Drop (HD) parachutes, developed by Defence Research and Development Organisation (DRDO) in 2000 and 2009 for Army and Navy could not be commenced due to delayed supply of pilot lot by OPF for validation trial.
Army’s requirement of Combat Free Fall(CFF) parachute, developed by DRDO in 2006, was not fulfilled due to life threatening defects observed by Army in validation trials and non-resolving of the quality problems by OPF. As the CFF Parachute directly impacts the operational efficiency of the Special Forces, Indian Army, after waiting for 19 long years, had to take the harsh decision of foreclosing this project and go in for purchase of a limited number from Foreign OEM’s. Because the OPF/OFB continue to claim that they shall make it, even expertise of Indian vendors who have manufactured parachutes for Chandrayan and landing capsules have not been allowed to be exploited.
The story of Army’s Combat uniforms, which the Indian Army proposed to procure privately at one third the cost and of better quality, with a saving of Rs 157.5 Cr annually having been turned down was covered well by media. The high cost of items is due to the overheads cost as brought out by CAG, “The Cost of Overheads accounted for 36 per cent of the cost of production. The high overheads are a consequence of high committed cost on a workforce that is not directly deployed for production”. Consequently, not only that the services have suffered, but indigenisation itself has taken a huge step backwards.
Similar is the case with many other projects, as mentioned earlier in rims of paper and voluminous CAG Reports. Particularly on quality, the Report points out that, “No documented comprehensive quality policy has been laid down by the Ministry. Instead, piecemeal orders/instructions are issued by the Ministry and OFB. In the absence of an overarching quality policy, the existing quality structure lacks coherence and does not establish synergy needed for optimum distribution of responsibility and authority among the stakeholders in Defence Production”.It must not have been easy for MHA to taken a decision to go in for purchases of weapons for ITBP, BSF, CRPF, SSB, CISF, NSG and Assam Rifles from private source, for which, as per reports, the first round of discussions has already been completed with the vendors.
For the defence sector, ‘self-reliance’ has remained elusive for seven decades and India remains the second largest arms importer on the global stage. The imports have been resorted to not because Indian Armed Forces want imported equipment. In fact, the services have a genuine concern of the pitfalls of lifecycle support of any imported items also for any future upgrades, since the dependence is on an Original Equipment Manufacturer. Therefore, import dependence and consequent strategic vulnerability have long been an area of concern. Despite continuous efforts, indigenisation has remained a losing battle.
Defence production in major arms manufacturing countries in Europe and USA have come up with state-of-the-art technologies because defence production is wholly privatised. Government-controlled defence production is a success in communist China because rigid work schedule is enforced and production is closely monitored even in private industries. India’s democracy is witness to the worst work culture, slippages, wasteful expenditure and corruption in the government-controlled defence-industry, organizations and structures.
The private industry feels OFB doesn’t fear competing with them because the so-called level playing field isn’t level with OFB being a government organisation. Only some projects come to the private industry. Foreign Original Equipment Manufacturers (OEM) too prefer to team up with indigenous private industry, e.g., Kalashnikov was keen to team up with Adani Defence and Aerospace to set up the AK-203 assault rifles production in India. As on date even this project is held up at negotiation level between GOI and Indo-Russia Rifles Private Limited (IRRPL), despite the MoU having been signed in March 2019.
On 13 June 2020, Indian media broke the news that the joint IRRPL between the Indian Ordnance Factory Board (OFB) and Russian Rosoboron Export and Kalashnikov company has run into pricing problems. The Ministry of Defence (MoD) was reportedly forced to appoint a costing committee on 11 June,2020 due to the “unreasonable and unacceptable” price quoted by the IRRPL to make 6.71 lakh AK-203 rifles. The five-member costing committee, has been asked to fix a “reasonable price” for manufacturing the basic version of the 7.62×39 mm calibre AK-203 rifle. It seems the Joint Venture first sought repeated extensions to submit its techno-commercial bid and then when it did in February this year, it quoted a price much higher than the benchmark price.
A large number of Design and Development projects, despite having very good designs have turned out to be very bad products. 5.56 mm INSAS is just one of the many stories. Similarly, large numbers of foreign purchases of urgently required weapons and equipment have been scuttled by the OFB at the stage of Acceptance of Necessity(AON) by false claims that it can be manufactured by them. Forces have waited for years for such equipment to be supplied. Consequently, it has not only put the modernisation process back by many years but even optimal equipping has suffered. Hence, in every operational contingency like Uri, Balakot or Galwan, Indian Army has to go for emergency procurements for items as simple as assault rifles and ammunition.
The call taken by the Government on corporatisation to begin with is just a baby step and this must be pressed forward ruthlessly despite the 84,000 plus workers of the OFB having gone in for a nationwide strike against this initiative. This must also happen in the right earnest by revisiting the various committee reports and CAG reports. Indian Armed Forces are crying for self-reliance and Defence Industry is crying for indigenisation. If at all it has to happen, it can happen only now with a strong government and a wave favouring the “Atmamirbharata” call.
This must happen despite the OFB, as the organisation will only find self-serving ways and means at the cost of better equipping of the armed forces. This may warrant a harsh decision of allowing participation of private industry with level playing field even in those core areas where OFB has claimed sole rights since ages but has failed with much loss to the exchequer and the Armed Forces. The decision will have to be political and executed ruthlessly.
Lt Gen JK Sharma (Retd)
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of BharatShakti.in)
VIPIN KUMAR SINGH
vERY bIASED ARTICLE.
SOME FACTUAL MISINFORMATION SPREAD:
I request you to definitely criticise OFB but with proper benchmarks and facts. a responsible person like you presenting half truth may lead to a false opinion making. Every organisation is having problems and OFB is no different .. yes like user organisations and others OFB too needs reengineering but corporatisation with the stated goals appears to be not in sync with defence needs. Every country wants to sell the products not the technology…technology has to be developed inhouse and has a very high cost….all committies more or less makes nair committee as the basis for recommending corporatisation…Nair committee itself is very old and a lot of things have changed… probably now a comprehensive study with prevalent scenario is required before any further action…
To kill the lion and rule the jungle.
No benchmark no data… Just words.
Vipin Kumar Singh
Why my comment not published??
Afraid of truth..
Dear Gen , do you blame your tap for muddy water or somehow apply your brains too.. OFB is just a tap… If one distributes responsibility as presently done in MOD via vis. Design , manufacturing quality the outcome is any bodies guess… Seek views fr organization behaviour experts
Vipin Kumar Singh
Pl publish my comments else I will share them on social media…along with screen shot
This is army’s view of things. To know the other side talk to management and unions of OFB. You’ll get to know stories of forces not placing orders on time, changing specs frequently, not budgeting for items in numbers promised earlire. There are instances of OFs asked to make entire assembly lines of items ready and then not being given orders. Also, the forces’ preference for imported items is well known for reasons I will not go into here..
Official rebuttal of the Ordnance Factory Board (OFB) by Gagan Chaturvedi, Deputy Director General of Public Relations of the Ordnance Factory Board on behalf of the Director General Ordnance Factories and Chairman of Ordnance Factory Board.
The article by Lt Gen JK Sharma (Retd) titled “Burden of OFB: Liability at Armed Forces’ Cost” published on the website of Bharatshakti on the 6th of August is another one in a series of outpourings by retired Generals of the Indian Army offering unsolicited advice based on incomplete and inaccurate information loaded with innuendo, in-exactitude and irony.
The Ordnance Factories since their inception more than two centuries ago have strengthened the capacity of the State to wage war, both offensive and defensive, and their contribution in every skirmish, battle and war has been appreciated.
After the Kargil War, the then COAS, Gen. V.P. Malik, in the foreword to the book “Arming the Indian Arsenal” writes:
“Indian Ordnance Factories which could produce ammunition and some equipment for which they had the necessary technology rose to the occasion. But we faced considerable problems in procuring items that had to be imported at short notice.”
Further, the 42nd Report of the Standing Committee on Defence, presented on 13.03.2018, the 16th LokSabha recorded as under:
“OFB products are classic example of successful implementation of ‘Make in India’ programme initiated by the Government as almost 87% items of OFB products are indigenously made.”
The indigenous content of the products of the Ordnance Factories is over 90% while for ammunition it is 97%.
More recently the 8th Report of Standing Committee on Defence, presented on 13.03.2020, the 17th Loksabha recorded as under:
“Ordnance Factories are an integrated base for indigenous production of Defence equipment and ammunition and form the backbone of the country’s Defence Production.”
In addition, 25% of the revenue of the Ordnance Factories comes from products of in-house R&D.
The General, goes on to remark that the Ordnance Factory at Korwa has yet to produce a single gun since its establishment in 2007 and bandies the wildly inaccurate figure of 1253 Crores. The factory was established to manufacture the carbine, selected by Indian Army, through ToT. The fact that the Army has been unable to select a suitable carbine for manufacture at Korwa seems to have slipped his mind.
He goes on to bemoan the tilted playing field in OFB’s favour and reveals his loyalties when he expresses regret that the JV for the manufacture of the latest A.K. 203 rifles was not formed by the Adanis.
His ramblings about the high cost of the rifle, reveal his lack of appreciation of the fact that the IRRPL is a private entity headed by an Army officer and the price quoted by the company is entirely based on their own calculations.
The worthy General’s diatribe veers more sharply from the truth when he talks about the Ordnance Parachute Factory which has been supplying Parachutes for seventy-five years without a single incident of Parachute failure. For the very same period that he castigates the factory for not supplying parachutes, the factory registered a growth of 53% in turnover. This could certainly not have been achieved without supplying the parachutes that the author claims were not supplied.
The statement regarding the Heavy Drop (HD) parachutes is equally inaccurate. OPF has already developed a Heavy Drop Parachute for 3-ton load and has supplied 48 sets. The Heavy Drop Parachute system for 7-Ton has also been cleared trials.
The reason for delay in Combat Free Fall parachute was essentially due to a large number of design modifications at every stage of manufacture.
The allegation of OFB inhibiting vendors from supplying parachutes for Chandrayan is laughable. The sharing of the technology for any product is a decision of the DRDO. The Ordnance Factories supplied explosives for Chandrayan and could easily have supplied parachutes too.
The issue of combat uniforms raised by the author fails to take into consideration the fact that they have to undergo thirty two mandatory quality checks. They are made from dope dyed fabric (where the yarn is dyed before weaving) manufactured by integrated mills, the specifications even lay down the number of stitches per decimeter and all the materials used such as thread, buttons etc. have to be cleared by NABL accredited laboratories. These are hardly the kind of specifications that can be imposed on the friendly cantonment tailor.
The last word on uniforms is by the erstwhile MGO Lt. Genl. Ravi Thodge, PVSM, AVSM, VSM, SM, who vide his DO letter number 34 775/ RT/ DO dated 20.02.2016, stated as under:
The uniforms, though stitched at a very short notice, came in for appreciation by all the dignitaries who were present at the COAS ‘At Home’ function which included The Hon’ble President of India The PM, The RM and a host of other dignitaries. As the MGO, my chest swelled with pride to see soldiers so smartly attired in the combat dress which were stitched in your factory. The quality control process in terms of the cloth as well as garmenting is excellent.
The author’s statements about INSAS rifles are similarly inaccurate.OFB has manufactured and supplied more than 20 Lakh Rifles over a period of more than 20 years to various security forces. The Rifle was designed by DRDO as per QR (Army’s specification) and supplied to the army after inspection by the Army’s representative, the DGQA.
High overhead costs, mentioned by the author are due to a number of reasons. Commercial considerations underlie corporate attempts to garner competitive advantage. The Ordnance Factories on the other hand are not always able to follow the diktats of commercial prudence. Not only do they provide life time warranty but are also required to keep production lines alive for strategic reasons even in the absence of any load for a number of years or uncertain and uneconomical load.
Over the years, a number of measures leading to improvements in productivity and quality and strategic make or buy decisions have led to steady increase in cost competitiveness of the products supplied by the Ordnance Factories.
A comparison of some of the products’ issue prices of 2017-18 and 2018-19 give an indication of the extent of this achievement. For example the reduction in the price of the Bridge Layer Tank is 5% and 7% for the Stallion Mark IV BS-III vehicle and 10% for the LPTA- 715 BS-III, both of which on the work horses for transportation of troops and equipment. In the case of the 84mm High Explosive Anti Tank (HEAT) ammunition and the 155mm Shell the reduction in price is 9.6% and 3% respectively.
The differences in the cost of some of the successfully indigenised items are encouraging e.g. the indigenous T-90 tank engine handed over to the then Defence Minister, Smt Nirmala Sitharaman in July 2018 is 34% less than the Russian engine. The indigenous Bi Modular Charge System (BMCS) is 20-30% less expensive than the imported one. Similarly, the difference in the case of 84mm (HEAT 551 and the 125mm , Fin Stabilised Armour Piercing Discarding Sabot (FSAPDS) ammunition is 38.6% and 28.5% respectively.
It is because of this success achieved in pricing products competitively that OFB has secured repeat orders for export of ammunition supplied under self-certification and has also supplied 155mm X 52 calibre barrels and breech mechanism to a major European Manufacturer for the purpose of testing.
To say the least, OFB also exhibited its capabilities of innovative technological interventions and adaptability for new products during the initial phases of current pandemic. OFB led the nation in manufacture of life saving items in fight of the nation against COVID-19 like sanitizers, three-ply surgical masks, PPE kits and pan India network for testing facilities of PPE kits with seven NABL accredited labs and hand holding of textile industry.
Deciding a recognized national asset which has over two centuries of recorded achievement by self-styled fly-by-night specialists to earn brownie points and carry favour with vested interests in anticipation of proposed govt policy seems to have become fashionable.
Let us appreciate that every existing system in the world has scope for improvement with changing circumstances and an ever evolving business environment.