Seven New Defence Firms Replacing the Ordnance Factory Board Launched by PM Narendra Modi

Background:

• The Ordnance Factory Board (OFB) was dissolved, and seven new defence companies were created. These were inaugurated in a ceremony organized by the Ministry of Defence on ‘Vijayadashami’ in New Delhi on October 15, 2021.
• All 41 ordnance factories and their assets, previously under the OFB, have now been transferred to these newly formed companies.
• Here is a quick look at these seven new defence companies:
• Munitions India Limited (MIL): This company consists of 12 Ordnance Factories that previously produced explosives and ammunition.
• Armoured Vehicles Nigam Limited (AVANI): A merger of 5 OFs that manufactured vehicles.
• Advanced Weapons and Equipment India Limited (AWE India): This company is made up of 5 OFs that manufactured weapons and equipment.
• Troop Comforts Limited (TCL): Specializes in producing troop comfort items.
• Yantra India Limited (YIL): This company was formed by combining the 8 OFs that produced metals and steels.
• India Optel Limited (IOL)
• Gliders India Limited (GIL).

The Necessity:

• The prowess of India’s ordnance factories was globally recognized during World War I . However, post-Independence, these factories were neglected, leading to India's increased reliance on foreign supplies.
• There was a need for modernization and the adoption of new technologies in these factories, which unfortunately was overlooked.
• This negligence led to India becoming heavily dependent on foreign nations for strategic needs.
• These newly formed seven defence companies aim to change this scenario drastically.

Objectives:

The restructuring aims to:

• Turn ordnance factories into profitable and productive assets.
• Enhance product range expertise.
• Boost competitiveness.
• Improve the quality of products.
• Enhance cost-efficiency.
• Ensure self-reliance in defence preparedness.

PM Modi expressed his confidence in the sector, stating that the goal is to make India the world’s leading military power.

Corporatization of the Companies:

• Since 2000, four committees were established to suggest reforms in the defence sector. Except for the one formed by former Defence Minister Manohar Parrikar, the other three committees (TKS Nair Committee (2000), Vijay Kelkar Committee (2005), and Vice Admiral Raman Puri Committee (2015)) recommended the corporatization of OFB.
• However, the corporatization of these companies does not imply privatization. Instead, it means that the government has granted full functional autonomy to these companies, providing them with a conducive production environment.
• Private companies will be allowed to participate in delivering certain services, which will be appropriately monitored.
• The interests of the workers of these factories have been fully safeguarded.
• This new structure aims to overcome the existing shortcomings of OFB and incentivize these companies to become competitive and explore new opportunities, including exports, while safeguarding the interests of the employees.

Innovation and Technology:

• In the 21st century, the growth and brand value of a country or a company are determined by its research and innovation. India’s growth in sectors like software and space is the biggest testament to this fact.
• These companies will focus on research and innovation. They aim to not only match the world’s biggest companies but also take the lead in future technology.

Way Forward:

• The primary objective of establishing these seven PSUs is to meet the domestic requirements of defence articles and make India self-reliant.
• The focus is on reducing India's defence imports and making her a significant exporter of such equipment in the near future.

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