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Ordnance Factory Board:

GS Paper 2

Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Context:

The 220-year-old Ordnance Factory Board will be dissolved on October 1, and its units will be corporatised under seven PSUs.

 

Need for:

  • Corporatisation will bring these entities under the purview of The Companies Act, would lead to improvements in efficiency, make products cost-competitive, and enhance their quality.
  • It has been argued that OFB’s monopoly has led to innovation drying up, apart from low productivity, high costs of production, and lack of flexibility at the higher managerial levels.
  • Functioning directly under the Ministry of Defence, the OFB and its factories could not retain profits, and thus had no incentive to work towards increasing them.

 

Recommendations by various committees in this regard:

The restructuring of the Kolkata-headquartered OFB into corporate entities was recommended in one or the other form by at least three expert committees on defence reforms set up in the last two decades — the TKS Nair Committee (2000), Vijay Kelkar Committee (2005), and Vice Admiral Raman Puri Committee (2015).

  • The Shekatkar Committee did not suggest corporatisation, but recommended regular audits of all ordnance units considering past performance.

 

How did the government tackle the workers’ strike against this decision?

Through the Essential Defence Services Ordinance and the Bill. They aimed primarily to stop workers of ordnance factories from going on strike.

 

Highlights of the Bill:

  1. It is meant to “provide for the maintenance of essential defence services so as to secure the security of nation and the life and property of public at large and for matters connected therewith or incidental thereto”.
  2. The Bill empowers the government to declare services mentioned in it as essential defence services.
  3. It also prohibits strike and lockouts in “any industrial establishment or unit engaged in essential defence services”.

 

Latest changes:

The Ordnance Factory Board was directly under the Department of Defence Production and worked as an arm of the government. But, in June the government announced its corporatisation.

  • As per this plan, 41 factories, ammunition and other equipment to the armed forces will become part of seven government owned corporate entities.
  • The government has claimed that the move is aimed at improving the efficiency and accountability of these factories.
  • However, following this, many federations announced the launch of indefinite strikes.
  • This was countered by the Essential Defence Services Ordinance which was promulgated on June 30.

 

Who will it affect?

It has a direct bearing on around 70,000 employees of the 41 ordnance factories around the country, who are unhappy with the corporatisation of OFB, fearing that it will impact their service and retirement conditions.

 

Need for:

The ordnance factories form an integrated base for indigenous production of defence hardware and equipment, with the primary objective of self reliance in equipping the armed forces with state of the art battlefield equipment.

  • Therefore, there is a need to provide for the maintenance of essential defence services so as to secure the security of nation and the life and property of public at large and for matters connected therewith or incidental thereto.

 

Insta Curious:

Do you know about the Defence Acquisition Council headed by the defence minister? What Re its functions? Reference: read this.

 

InstaLinks:

Prelims Link:

  1. What is OFB?
  2. Highlights of the Bill.

Mains Link:

Discuss the concerns associated with the corporatisation of OFB.

Sources: Indian Express.