Modi Govt going full steam ahead to convert 41 Ordnance Factories into Pvt Ltd Corporations

Modi Govt going full steam ahead to convert 41 Ordnance Factories into Pvt Ltd Corporations

The defence ministry is likely to seek the nod of Cabinet Committee on Security (CCS) to set up an Empowered Group of Ministers (EGoM) to convert 41 ordnance factories and 16 other associated organisations into corporates to make them competitive and self-reliant in the production of arms and ammunition.

If the government manages to do that, the Indian ordnance factories will lose its character of “attached office” under the department of defence and become private limited companies with management control by the government, top government sources aware of the development told ET.

Workers’ unions, including Bhartiya Pratiraksha Mazdoor Sangh (BPMS) which is associated with RSS’ Bharatiya Mazdoor Sangh, have called for an all-India strike on August 20 to protest the government’s move. Recently, West Bengal CM Mamata Banerjee wrote to PM Modi objecting to the “de-governmentisation” of ordnance factories for which she claimed there was “not even an iota of stakeholders’ consultations till now.”

To quell employee anxiety over the corporatisation of ordnance factories, the ministry proposes to safeguard their wages and retirement benefits. Over 1.45 lakh employees, including 1,752 Group A officers of the Indian Ordnance Factory Services, are working in 41 factories, nine training institutes, three regional marketing centres and four regional controllers of safety.

The NDA government is optimistic that by transforming these into public sector corporates, the turnover of these factories can be doubled from the existing ?400 crore in the next five to six years, said a senior official privy to July 23 note meant for CCS.

The defence ministry is in the process of consulting stakeholders before the CCS takes a call on the proposal, said one of the sources cited above. The MoD refused to comment on the matter.

The government is hopeful that dependence on imported technology will come down sharply from the current 75-80% in less than a decade and the country would be able to export 24% of its products.

The MoD wants the EGoM to supervise the process of converting the ordnance factory boards (OFBs) from a “subordinate office” in the MoD to a 100% government-owned corporate under the Companies Act of 2015.

The EGoM, once constituted, will develop a mechanism for stakeholder consultation and decide whether the OFB should be broken into single or multiple defence PSUs.

The EGoM will be headed by defence minister Rajnath Singh and include home minister Amit Shah, finance minister Nirmala Sitharaman, law and justice minister Ravi Shankar Prasad, labour and employment minister Santosh Gangwar and the minister of state for personnel, public grievances and pensions Jitendra Singh, as it members.

The MoD feels this transformation will improve flexibility and help in better decision-making in the functioning of ordnance factories, including creating space for joint ventures with foreign firms. It will aim to move away from the current pricing mechanism where all OFB costs are passed on to the customer, to a process of competitive pricing which will ensure cost reductions for the armed services and paramilitary forces.

Over the past two decades, many high-level committees have studied ways to improve the functioning of ordnance factories to make them more competitive.