Govt approves restructuring of OFB into 7 new corporate entities

The transformation is likely to take place by the end of the year.

The Ordnance Factory Board (OFB) will be dissolved, and replaced by seven new Defence Public Sector Undertakings, which will oversee the 41 ordnance factories across the country. The Cabinet decision on Wednesday approved the creation of the entities, which will be 100 per cent owned by the government.

The transformation is likely to take place by the end of the year.

Talking to reporters, Defence Minister Rajnath Singh assured that the interests of the over 70,000 OFB employees will be safeguarded. “I assure that the service conditions of the employees will not be affected by the move,” he said. The Cabinet note on the decision also mentions there won’t be any change in the service conditions.

“It is a major decision from the perspective of national security… India should be Atmanirbhar when it comes to national security,” he said, asking everyone to support the “historic decision”.

In October last year, the OFB employees had threatened to go on an indefinite strike, which was called off after discussions with Defence Ministry officials.

A top ministry official said all OFB employees in the production units will be transferred to the new corporate entities on a deemed deputation initially for a period of two years without altering their service conditions as central government employees. Also, the official said, “pension liabilities of the retirees and existing employees will continue to be borne by the government”.

The move to replace the OFB with the seven corporate entities “will allow these companies autonomy as well as help improve accountability and efficiency”, said an official. The restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepen their specialisation in product range, enhance competitiveness and improve quality and cost-efficiency, the official said.

The seven entities will be responsible for different verticals of the products being produced by the 41 ordnance factories. The Ammunition and Explosives group will be engaged in production of ammunition while a Vehicles group will engage in production of defence mobility and combat vehicles. There will also be a Weapons and Equipment group, Troop Comfort Items group, Ancillary group, an Opto-Electronics group and a Parachute group, the official said.

He said the new structure will help in overcoming shortcomings in the existing system of OFB by “eliminating inefficient supply chains and provide these companies incentive to become competitive and exploring new opportunities, including exports”.

The decision to corporatise the OFB was taken by the Cabinet Committee on Security in July 2020, when it approved to transform it into one or more government-owned corporate entities to improve its autonomy, accountability and efficiency in ordnance supplies. In September, the government formed an Empowered Group of Ministers headed by Singh to oversee the process. A ministry official said this EGOM will take decisions on any issue that may arise.

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