Defence manufacturing in India has not taken off despite various efforts by governments in the last seven decades because none of them tried to attack the root cause – the trade unionism prevalent in defence PSUs.
In the Union budget 2021, Finance Minister Nirmala Sitharaman announced the corporatization of the Ordnance Factory Board (OFB). Headquartered in Kolkata, OFB is said to be among the oldest and most inefficient organizations in the world. A white elephant of the Nehruvian economy, it employs more than 80,000 people in 41 ordnance factories, 13 ordnance R&D centres, and nine ordnance institutes of learning.
However, corporatization is being vehemently opposed by the inefficient employees of these companies who are repeatedly threatening to go on permanent strike against the move. Now the Modi government has delivered them a heavy blow with The Essential Defence Services Ordinance 2021.
With this ordinance, which was cleared by President Ram Nath Kovind after the Union cabinet passed it, strikes and bandhs are completely banned for the employees working in the defence sector. The police have authority to “arrest without warrant any person who is reasonably suspected to have committed any offence under this Ordinance”.
“Any person, who commences a strike which is illegal under this Ordinance or goes or remains on, or otherwise takes part in, any such strike, shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to Rs 10,000 or both,” the notification issued by the Law Ministry said.
Often called the “fourth arm of defence”, OFB is disliked by the rest of the three arms- Army, Navy, and Air Force- due to production of inefficient weapons and untimely delivery. The Armed forces are often forced to procure some low-skilled arms and ammunition from Ordnance factories because it has no other buyer given inefficient and sub-standard products. In May 2019, The Tribune reported, “The Army has sought immediate intervention of the Defence Ministry to check rising cases of accidents involving battle tanks, artillery and air defence guns due to ‘poor quality’ of ammunition being supplied by the OFB.”
The move to corporatize the OFB will bring private company efficiency in the OFB, and it would not only produce world-class defence equipment but also ensure their timely delivery. Previously 6 employee unions at these 41 factories threatened to go on permanent strike from July 8 if the move is not reversed.
The idea of the corporatization of Ordnance Factories was floated as early as 2000 by the Nair Committee but the leftist ecosystem and its employees were so strong that the Vajpayee government could not implement those reforms at the time. After that the Congress-led UPA came to power and given the far left of centre allies it had, there was no question of the Manmohan Singh government implementing these reforms. Now the Modi government has decided to roll the dice and address the lack of indigenous production capacity in the defence sector.
The Department of Defense Production, under which state-owned production units like HAL, Ordnance Factories, and many other companies operate, remains the weakest link of the Indian armed forces. The country had to spend billions of dollars on defence procurement due to the inefficiency of OFB, HAL, and other state-owned producers. Despite their decades of existence and India’s third-largest defence budget, OFB and HAL- two of the largest state-owned contractors of Indian armed forces- ranks 37th and 38th in the global ranking of the defence contractors by revenue.
As per the CAG report, the inefficiency of Ordnance Factories adversely affects the preparedness of the Indian Armed Forces at a time when the country faces the threat of a two-front war. “A significant quantity of Army’s demand for some principal ammunition items remained outstanding as of 31 March 2018, thus adversely affecting their operational preparedness. In addition, the exports by OFB decreased by 39 per cent in 2017-18 over 2016-17,” the CAG report said.
Given the Himalayan inefficiencies of the Ordnance Factory Board, the government must crack down on employees who are protesting against the corporatization of the organization. And, for the sake of our armed forces who are facing China on one front and Pakistan on the other, the white elephant of the Nehruvian economy should be corporatized as soon as possible.
