Lean, Mean, Fighting Factory

Context: As part of its Atmanirbhar Bharat Abhiyan, GoI has announced corporatisation of Ordnance Factories (OFs) under the Ordnance Factory Board (OFB) for improving their autonomy, accountability and efficiency. 

Issues in Ordnance Factories Board

• Current governance structure is a relic of the past: and is not in consonance with the recent modern management practices. 
• High degree of government control: OFB was placed as a subordinate office of the Ministry of Defence under the direct control of the generalist bureaucrats.
• OFB has scant autonomy in administrative, financial or other decision-making matters.
• Shortcut strategies to ramp up production: by importing technologies has restricted their innovation capacities.
• Poor and Obsolete performance: due to less autonomy, low professional standards, weak technological advancements and product quality.
• Poor record of adherence to delivery schedules: with a high rate of rejection due to quality issues, costly and entrenched supply chains and redundant inventories.
• Turnover of the private sector manufacturer of defence equipment: is huge than that of OFB.
• Lack of motivation and training: in top management and labour force for achieving their true potential.
• Notifying items manufactured by ordnance factories as ‘noncore’: has freed the armed forces of the burden of procuring these items from OFB.
• Armed forces no longer have to obtain NOC from OFB before the procurement of noncore items.
• OFB’s product range, are available through multiple vendors: at a much lower cost, which helps the limited defence budget stretch further. 

Corporatisation of OFBs

• Corporatisation is not privatisation: hence as as a corporate entity, it will remain 100% government-owned.
• Corporatisation is not just about self-reliance: it is also about providing better equipment to armed forces.

• Several committees have recommended its corporatisation: like TK A Nair Committee, the Vijay Kelkar Committee, Raman Puri Committe and the Shekatkar Committee and reports of the CAG.

Benefits of Corporatisation of OFBs 

• Freed from the government-mandated price control mechanism. 
• No longer be able to take customers for granted through its archaic ‘cost plus profit’ pricing structure that brings incompetence.
• Create room for talented professionals of OFB to strive for higher standards, technological innovation, price competitiveness and adherence to strict delivery schedules.
• Freedom to enter into joint ventures with domestic and foreign manufacturers will help in catering new markets and becoming more profitable.
•  Profits can be ploughed back to create new efficiencies, enhanced employment opportunities and better terms for all its employees.
• OFB factories participate in open tenders on a competitive basis will increase their transparency, accountability and efficiency.