OFB employees seek Prime Minister Narendra Modi's intervention against proposal to corporatise PSU

The OFB follows a cost-plus basis for pricing and its turnover was Rs 14,431 crore in 2018-19 with the main customers being the armed forces and the paramilitary forces.

Yatish Yadav September 05, 2019 16:15:28 IST
OFB employees seek Prime Minister Narendra Modi's intervention against proposal to corporatise PSU
  • The employees said corporatisation would not solve problems and the govt should adopt other measures

  • The note for CCS pointed out concerns raised by armed forces regarding high cost of OFB products and alleged poor quality

  • Once implemented, the proposed move, the government believes, will improve the functioning of the Ordnance Factories

New Delhi: Amid a simmering discontent over proposed corporatisation, the Ordnance Factory Board (OFB) employees unions have approached Prime Minister Narendra Modi seeking to shelve his government's proposal to corporatise the public sector undertaking (PSU), which they claimed was against the national security.

Three employees federations under the OFB — Bharatiya Pratiraksha Mazdoor Sangh, All India Defence Employees Federation and Indian National Defence Workers’ Federation — said corporatisation would not solve the problems and the government should adopt other measures to improve the performance of 41 Ordnance Factories. The PSU is involved in the manufacturing of a wide variety of products like tanks, armored vehicles, artillery guns and small arms along with ammunition used by the Indian armed forces.

Taking up the issue, a representation of the employees was sent to the prime minister on 3 September.

Last month, the employees had called off a strike after the government assured them of setting up a high-level committee to review the proposed corporatisation in consultation with the OFB Union’s representatives. Besides 41 factories, OFB has nine training institutes, three regional marketing centres and four regional controllers of safety functioning under it. As per the existing structure, the OFB is a subordinate office of the Department of Defence Production under the Ministry of Defence.

OFB employees seek Prime Minister Narendra Modis intervention against proposal to corporatise PSU

Representational image. Reuters

The government note prepared for the Cabinet Committee on Security (CCS) and verified by Firstpost stated the functioning of Ordnance Factories came under the scrutiny of various high-level committees in the last two decades. It was with an objective to improve their functioning and enabling them to cope with greater competition, faster technological advancement and making these factories as vehicle of self-reliance for defence preparedness of the armed forces.

The note for the CCS further pointed out concerns raised by the armed forces, over the last few decades regarding high costs of the OFB products, alleged poor quality and delay in supply.

“As a government department, the OFB cannot retain profits and therefore has no incentive to make profits. Moreover, it has largely remained as a production centre with transfer of technology from foreign original equipment manufacturers (OEMs). According to a rough estimate, nearly 75-80 percent of the production by the OFB units is based on imported technology. Another issue which was raised in connection with the OFB was large underutilised capacities in the factories,” the note claimed.

R Srinivasan, general secretary of Indian National Defence Workers’ Federation (INDWF), told Firstpost that government’s arguments are not valid in the case of the OFB since it is also required to maintain idle capacities to take care of a surge in demand in event of a war situation.

Srinivasan further said that so far they have not received any intimation related to the constitution of a committee comprising senior Defence Ministry officials and that is why they have approached Modi and his ministers to ensure that any hasty decision should not be taken by the government.

“We will wait for another 15 days before deciding the future course of action. In our joint representation, we have argued why the corporatisation proposal of the OFB would be a futile exercise. There are various other measures which the government can adopt to improve its quality, timeliness of delivery and capacity utilisation. No doubt the OFB is operating in a competitive environment and its performance must be improved by the government through the infusion of technology, manpower in research and development as well as more investment in infrastructure,” Srinivasan said.

The government, however, has put up a different argument citing the recommendations of various committees in the past. It said the Ordnance Factories should be converted into a public sector company from a government department under the Companies Act, 2013 as a measure to improve self-reliance in defence preparedness.

The OFB follows a cost-plus basis for pricing and its turnover was Rs 14,431 crore in 2018-19 with the main customers being the armed forces and the paramilitary forces. The government believes the proposed move will increase the turnover to Rs 30,000 crore by 2024-25 and will reduce the dependence on imported technology.

Once implemented, the proposed move, the government believes, will improve the functioning of the Ordnance Factories and quality of its products which will enable the new entity to follow market-based quality practices.

“The Ordnance Factories have massive production infrastructure and have a large pool of talented and experienced manpower. Ordnance Factories are extremely valuable assets of the Ministry of Defence, both in terms of value and criticality. This proposal would lead to better utilisation and growth. It also offers better returns to the Defence Ministry due to efficiency propelled by operational freedom given to the management,” the government note further stated.

C Srikumar, general secretary of All India Defence Employees Federation, rebuts the government's claim saying the OFB structurally is a arms industry and the customers requirements vary from year to year.

“We can only survive as a government industry and if converted, it will become a sick unit and may collapse within a few years. Moreover, when you have the same set of customers, how it will turn into a world-class organisation overnight. The move may turn the OFB into another BSNL. We want the prime minister's intervention because more than 44,000 employees' interest is at stake. They have been hired through national level competitive exams and would not like to be treated as corporation employee,” Srikumar said.

The government, on the other hand, is trying to allay the fears as the CCS note has pointed out that they need to protect all the benefits provided to the Ordnance Factories employees.

“ It is proposed to safeguard the wages and retirement benefits of the employees because the process of corporatisation may lead to anxiety and uncertainty about the future in the minds of some employees,” note said.

The letter to Modi said if the government wanted to strengthen the OFB, it can change the structure, management set-up and decision-making process of the Ordnance Factories on par with the Railway Board, ISRO and Department of Atomic Energy. For achieving this purpose, there is no need to corporatise the organisation, the letter said.

The letter has also blamed the top management of the Ordnance Factories for its lack of efficiency and pointed out that senior officials hardly visited the manufacturing units as they are confined to their respective headquarters.

“The OFB as a corporation will not be able to compete with the private sector players for getting the workload from the Army since private sector keeps limited workforce and 90 percent the work they get done through contract workers,” the employees association's letter dated 3 September addressing the prime minister said.

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