Babu Beat. Providing ordnance factories ammunition for change

Ever since Finance Minister Nirmala Sitharaman announced plans to corporatise the Ordnance Factory Board (OFB), in May, there has been employee unrest in the defence organisation. Worker unions have been protesting the move. But the step towards corporatisation has been gathering pace over the last few months, with an empowered group of ministers (EGoM) constituted to oversee the process. KPMG Advisory Services Pvt Ltd, along with Khaitan & Co, has also been roped in to provide strategic and implementation management consulting services to help the Department of Defence Production with the corporatisation of OFB.

The move towards corporatisation seems to have come at the behest of the military, which wants a reliable supplier of ammunition, especially at a time when the situation along our borders is uneasy.

On the other hand, the 80,000-odd employees of OFB fear this could just be the first step towards privatisation. “The fear comes from the fact that the Finance Minister has announced that there will be only four corporations in strategic sectors — and the Defence sector is a strategic sector having nine DPSUs. Hence, a big question is, which Defence Public Sector Undertaking will be privatised?”, explains Mukesh Singh, General Secretary of Bhartiya Pratiraksha Mazood Sangh, one of the unions leading the protest.

But corporatisation — basically restructuring the state-owned asset into a corporation — is something the organisation’s biggest consumer, the defence forces, has been demanding, on the ground that it would improve autonomy, accountability and efficiency in Ordnance supplies.

As Lt Gen Sanjay Kulkarni (retd), former consultant, OFB, explains, “OFB has regularly performed below its potential for the last few decades and therefore the Kelkar Committee and Raman Puri Committee have found it to be a drain on the Defence Budget, with overpricing of material produced.” He points to how the Shekatkar Committee had said that corporatisation and not privatisation without compromising on national security was the way forward to meet user aspirations.

Biting the bullet

Kulkarni, who was also DG Infantry and Ex-Member Shekatkar Committee, says, “OFB has monopoly over several products required for the armed forces, with minimal innovation, no incentive to improve quality and cost efficiency, and with nil accountability for its products.” He adds, “The corporatisation of OFB will put it at par with other DPSUs managed by its own Board of Directors with broad guidelines from the government.”

There are hard targets to the corporatisation plan. The idea is to raise OFB’s turnover to ₹30,000 crore by 2025 from the existing ₹12,000 crore. Also, it can forge partnerships with private sector firms to get a competitive price for its products. The financial independence would also mean it will be able to generate funds through other measures, such as being listed on the stock exchange similar to other DPSUs.

However, the employees want another chance. “Give us a clear roadmap and we will show results,” argues All India Defence Employees Federation and unions like Indian National Defence Workers’ Federation and BPMS.

“The fears of trade unions of Ordnance Factories are totally unfounded that they will be laid off due to corporatisation.

“Instead, their expertise will be better utilised since efficiency, better quality of products, self-certification, timely delivery and accountability will improve the standing of OFB so it will be able to give private industry a run for its money,” argues Kulkarni.

Former bureaucrat and now HR Strategist, Prabir Jha, says, “Many jump the gun and confuse corporatisation with privatisation. A shift from a governmental department status to a governmental undertaking under a corporate sector does not imply, but does not rule out, part or full private sector participation.”

“The concerns of employees become complex because even at senior levels, a shift from an organised service (IOFS) to a mere corporate could eliminate all ministry deputations. So while nothing has even been recommended yet, the noise and use of the words interchangeably does suggest that this is not going to be a walk in the garden and will have huge HR and politico-cultural challenges to work through,” says Jha.

The EGoM terms of reference clearly state that it will look into matters related to various categories of employees, including protection of their salary and pension of existing employees. So, one will have to wait and watch what the outcome will be.