• The Union Cabinet approved a long-pending proposal to restructure the nearly 200-year-old Ordnance Factory Board (OFB) that operates 41 ammunition and military equipment production facilities into seven state-owned corporate entities to improve its accountability, efficiency and competitiveness.

• The decision to corporatise the OFB on the lines of defence public sector undertakings was taken at a meeting of the Union Cabinet, nearly two decades after the reform measure was first mooted to bring professionalism and significantly enhance its productivity.

• Defence Minister Rajnath Singh said there will be no change in service conditions of nearly 70,000 employees of the organisation and that the decision is driven by efforts to boost India’s defence manufacturing sector.

Ordnance Factory Board

• Ordnance factories in India are one of the oldest and largest industrial setup which functions under Ordnance Factory Board (OFB) with the objective of achieving self-reliance in equipping the Armed Forces with state-of-the-art battlefield equipment.

• The first ordnance factory, now known as the ‘Gun and Shell Factory’ at Cossipore in Kolkata was established in 1801. 

• There were 18 ordnance factories in India before the country’s Independence in 1947. 

• The Ordnance Factory Board (OFB) came into existence on April 2, 1979 in Kolkata.

• OFB is functioning under the administrative control of the department of defence production of the ministry of defence.

• Indian ordnance factories, headquartered at Kolkata, is a conglomerate of 41 factories, 9 training institutes, 3 regional marketing centres and 4 regional controllers of safety.

• They are engaged in the production of a range of arms, ammunition, equipment, clothing, etc primarily for the Armed Forces of the country. 

• Army places demand on OFB for supply of the items and subsequently, OFB fixes production targets to the factories to fulfill the demand of Army.

• Every year, March 18 is celebrated as Ordnance Factories Day in India

What are the key reforms?

• This restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepening specialisation in the product range, enhancing competitiveness and improving quality and cost-efficiency.

• The government has also decided to delegate the authority of the Cabinet to an empowered Group of Ministers headed by Rajnath Singh to decide on matters related to the restructuring of the OFB.

• Besides Rajnath Singh, the empowered group comprises Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Law Minister Ravi Shankar Prasad and Labour Minister Santosh Kumar Gangwar.

• The seven entities are likely to take shape by the year’s end and they will be operated by professional management with a larger goal of enhancing the product range, increasing competitiveness and improving cost-efficiency.

• The seven entities will include ammunition and explosives group, vehicles group, weapons and equipment group, troop comfort items group, ancillary group, optoelectronics group and parachute group. 

• The ammunition and explosives group would be mainly engaged in the production of ammunition of various calibre and explosives and its focus would be to exploit the huge potential to grow exponentially including for the export market.

• The vehicles group would mainly engage in the production of defence mobility and combat vehicles such as tanks, BMPs (infantry fighting vehicle) and mine protected vehicles. The focus of the group would be to increase its share in the domestic market through better capacity utilisation and also to explore new export markets.

• The weapons and equipment group would be mainly engaged in the production of small arms, medium and large-calibre guns, and other weapon systems and is expected to increase its share in the domestic market through meeting domestic demand as well as product diversification.

• The new structure would help in overcoming various shortcomings in the existing system of OFB by eliminating inefficient supply chains and provide these companies incentive to become competitive and explore new opportunities in the market including exports.

• At present, the government has to shell out around Rs 5,000 crore annually to pay the salaries of the OFB employees. Additionally, it gives around Rs 3,000 crore to OFB as an operational cost.

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