3 Federations Against Corporatisation Of Ordnance Factories



Date: November, 2016

Shri. Manohar Parrikar
Hon’ble Defence Minister,
Government of India
South Block, New Delhi – 110 001

Subject: Protest against the proposal of corporatizing the Ordnance Factories against the assurances given to the recognized Federations of Trade Unions of Defence Civilian Employees.

Respected Sir,

Your kind and immediate attention is invited to the above mentioned subject matter. Indian Ordnance Factory Organization is more than 215 years old Government Industrial Organization. Ordnance Factories are strategic industries established to take care of the requirement of Armed Forces and hence are directly concerned with the security of the Country. The Ordnance Factories are effectively functioning as a Departmental Organization and we are taking all efforts to reach the target of Rs. 20,000 crores given by the Hon’ble Defence Minister in the next two years. In this situation to divert the attention of the committed workforce of Ordnance Factories and to demoralize them a news is being spread all over the Ordnance Factories that the Government is seriously considering a proposal for converting the departmentally run Ordnance Factories into a Corporation. It is also being told that a note in this regard from DDP has been forwarded to the office of the Hon’ble Prime Minister. We are completely in the dark in this regard. In the last Departmental Council (JCM) Meeting chaired by the Defence Secretary the entire Staff Side has opposed the recommendations of the Raman Puri Committee to corporatizes Ordnance Factories. Moreover, in the past the Defence Ministers including the present Hon’ble President of India and also your honour have given assurances that Ordnance Factories would continue to remain as Departmental Organization under MoD.

In view of the developments we submit the following for your kind and favourable consideration and also we request you to give us an audience in this regard.

Indian Ordnance Factories

Prior to independence there were 16 Ordnance Factories which was subsequently expanded to achieve self reliance in Defence and today there are 41 Ordnance Factories. Ordnance Factories are the major supplier for the Indian Army. OFB makes a wide range of products with wide variation of technology such as Armoured Vehicles, Artillery Gun, Small Arms, Ammunition (both large and small calibre), Vehicles, Optical and Electronic Instruments, Troop Comfort items like Strategic Uniforms like Army Logo, Uniform, extreme climate clothing, Boots, Tents and Parachutes etc. The OFBs product mix comprise around 600 final products and 300 intermediate products. It is pertinent to mention here that our Army was able to drive back Pakistan in the 1971 war and subsequent liberation of Bangladesh, followed by the Kargil crisis and the recent Surgical Strike of the Indian Army only with the Arms, Ammunitions and other equipments produced by the Indian Ordnance Factories.

OFB is not a commercial organization for earning profit like any other business. OFB is performing with all efficiency inspite of various limitations such as:-
(a) Uneconomic quantities to be produced to meet strategic needs
(b) Difficulties in entering into long term agreement with dedicated vendors.
(c) Non integration of Finance functions.
(d) Clash with DGQA on Quality Assurance responsibility.
(e) Transition period during change over from one weapon/equipment/ strategic uniform/vehicle etc. affects the workload of the Factories. Recent example is Army has stopped taking INSAS Rifle, Army has not selected a suitable replacement of INSAS. To meet the requirement of Army OFB has developed weapons like Amogh, JVPC, Ex-Calibre, 7.62 Assault Rifles, MCIWS etc. through R&D efforts along with DRDO. Because of delay in decision making process by Army, three Small Arms Factories are having acute shortage of workload.
(f) Products developed first by DRDO and then technology for mass production given to Ordnance Factories results in delay in mass production and capacity creation for same.
(g) Provisions in DPP-2013 which force Ordnance Factories to compete with private suppliers to acquire workload of new products.
(h) Recent decision of Government to increase the FDI limit from the existing level of 26% to 49%.

It is matter of great satisfaction that inspite of all the above hurdles the value of issues of OFB for the year 2013-2014 was Rs.11,234 crores and the targeted value of issues for the current financial year is Rs. 12,380 crores. Here we would like to mention about some of the outstanding achievement of the OFB in the recent past.

Outstanding achievements:
1. Project DHANUSH (155 mm * 45 caliber Artillery Gun): The indigenously developed 155mm * 45 caliber Artillery Gun, named Dhanush, has been

successfully test fired. Both Winter and Summer trials of Dhanush have thus been successful. An indent of 114 Nos. of Dhanush is already in hand.

PINAKA has been one of OFBs ambitious projects. The current capacity of 1000 nos. which was initially created at OF Chanda is now being enhanced to 1500 nos. per year. Indents for 2300 nos. are already in hand, and future indents are in progress. Besides this, certain other versions of PINAKA are being planned:

(a) A project is being planned at OF Badmal for incendiary and bomblet versions of PINAKA with elecctronic fuze. The trials are in progress for the same in collaboration with DRDO.
(b) PINAKA Mark II version with a range of 60 Km is in final stages of development which will have case bonded technology, going to be used first time in any OFB product.

DGQA and user trial for indigenous BMCS was conducted at PFFR range at Pokhran from 27th June to 15th July. The performance was satisfactory. The formal report and Bulk Production Clearance (BPC) is awaited from Army. OF Nalanda is geared up to supply BMCS @4000 per month after receipt of BPC and indent.

A major milestone has been achieved with the successful conduction of the Life Cycle Test (LCT) of T-72 modified chemistry barrels (M.A.P.L.E. Barel) recently conducted at ACC&S, Ahmednager. Formal LCT of these barrels had not been carried out since its introduction in service in 2002. Subsequently, LCT was made contingent for placing further indents for T-72 auto-frettage barrels by Army. Consequent upon successful conduction of LCT, which is a 100% R&D effort of OFC, indent for 450 barrels is expected to be placed by Army on OFB. OFB is in the process of designing Auto-frettage barrels for T-90 tanks on similar lines.

FGK launched 0.32 Revolver MK-III(L) (NIRBHEEK) which received overwhelming response from media & customers. The initial two months have witnessed booking of more than 60 revolvers despite its higher issue price.

Under Barrel Grenade Launcher (UBGL) has been successfully productionized and OF Trichy is having a target of 5000 nos. for the current financial year.

New products which have been developed recently are
(a) Propellant for AK 100 Ammn
(b) PINAKA POD Assembly
(c) 84 MM TPT Projectile
(d) Rocket RGB – 12 (Practice Version), FUZE K3M For RGB-12
(e) Rocket RGB -60 HE Version
(f) Single Base propellant for 155 mm BMC Ammn.

The Troop Comfort Strategic Army Logo Uniform has successfully improved the personality and confidence of the Soldier along with the specialized boots produced by the OEF Group of Factories.

Keeping an eye on future, OFB has identified future technology areas from the Technology Perspective & Capability Road Map (TPCR) of Armed forces for certain products, which have already been taken up for development.

Recent achievements of Ordnance Factories

1. Trial evaluation of Rifle 5.56 mm Excalibur by Air Force: Indian Air Force is looking for a modern, reliable, robust and new generation state-of-the-art Assault Rifle to replace their old inventory of 5.56 mm INSAS Rifle introduced in IAF 2002. Accordingly, IAF has identified indigenously developed 5.56 mm Excalibur Rifle as a preferable replacement to existing INSAS Rifle and also equipping their QRTs.

A trial directive was issued by Air Hqr on 12th May 16 and a team of IAF officers conducted exhaustive trial of the weapon at Rifle Factory Ichapur from 23rd to 26th May 2016. The weapon fared satisfactorily on test parameters like accuracy and climatic tests etc. OFB is expecting order from IAF for this indigenously developed weapon in near future.

2. Supply of Indigenous NBC Recce vehicle: Ordnance Factory Medak in association with DRDO has indigenously developed and supplied the first NBC vehicle in July 16 to Indian Army against an Indent received for 16 Nos. NBCRV (Nuclear Biological & Chemical Reconnaissance Vehicle) is based on the versatile BMP IIK Amphibious Infantry Combat Vehicle and is designed to meet the tactical requirements of the Military Engineers for carrying out Nuclear, Biological & Chemical contamination survey. The vehicle can cross the water obstacles, remain afloat and can also be air transported. This is an important milestone towards in-house R&D and ‘Make-in-India’ initiative.

3. User Trial of 130mm upgunning at Pokharan: OFB has participated in the user trial of upgunning of 130 mm Gun to 155*45 calibre Gun in the month of July 2016 at Pokharan against RFP issued by the User, by fielding OFB SLB (Soltam Gun). The gun has fully complied with all RFP firing and non-firing parameters. The Gun has now been positioned at Jabalpur for DGQA and MET Trials, which will be followed by winter trials.

4. Supply of Anti Riot Ammunition for Internal Security: Extreme urgency for supply of 12 bore Anti riot ammunition (shot-9) was conveyed by MHA for use in Jammu & Kashmir to handle prevailing law and order situation. Though the ammunition was not in production line, Ammunition Factory Khadki was directed to commence production of this ammunition on war-footing and 1.10 Lakh rounds were issued to CRPF against their immediate requirement to tackle the prevailing law and order situation. Further, 1.00 Lakh rounds is also ready for collection by J&K police.

5. Kavach MOD-II: Kavach MOD-II Chaff launcher system has been developed, manufactured and installed on board INS Chennai (MDL Built ship). The Installation Test Firing (ITF) of Long Range & Medium Range Launchers of Kavach MOD-II was successfully carried out for the first time onboard the Naval ship on 04.08.2016.

6. Firing Trial of 7.62 mm * 39 mm Assault Rifle “GHAATAK”: OFB has developed 7.62 mm*39mm Assault Rifle “GHAATAK” as an alternative to AK-47. Rifle Factory Ishapore organized Demonstration cum firing trial on 10th August 2016 for CAPFs and on 19th & 23rd August 2016 for SPOs. It has been decided by CAPFs that each CAPF will buy 500 Assault Rifle each for wider exploitation. Subsequent to satisfactory exploitation, Bulk Order is expected from MHA for

“GHAATAK”. Ordnance Factory Trichy has also developed an Assault Rifle namely “TAR (Trichy Assault Rifle)”

7. Issue of Tear Gas Gun to CRPF: As requested by MHA, Rifle Factory Ishapore has issued 1000 Nos. of 12 Bore PAG and 500 Nos. of TGG to CRPF considering the operational requirement due to prevailing law & Order situation in Kashmir Valley.

8. Supply of Jacket & Trousers (Modified Design): Production & dispatch of 22,300 set of Jackets & Trousers Army Logo (Modified Design) for 5515 soldiers & Officers, assigned for deputation in UN Mission abroad has been completed in record time. Being highly satisfied with the quality & maintenance of time schedule of dispatch, MGO’s Office organized a ceremonial handing over of these Combat Uniforms to the troops proceeding on UN Mission.

9. 155 * 45 Cal ‘Dhanush’ Gun: Indian Army was not able to purchase a 155 mm Howitzer from global market despite vigorous search & efforts. GCF Jabalpur by its own R&D effort developed 155*45 mm Howitzer (Dhanush) which meets all aspirations of the Indian Army. Further, 03 guns have been handed over to the Army for Trials at Deserts and the same is underway. Also, the guns are ready for issue for exploitation in High Altitude Areas (HAA).

10. 5.56
mm Assault Rifle: This project is a joint exercise of Infantry Directorate of the Indian Army & OFB and is a perfect example of a “Make-in-India” weapon by joint task force.

RFI, Ichapore has produced 15 nos. of prototypes with modifications based on Users feedback on reliability, weight, length, compatibility with international sight, Aesthetics etc.

The assault Rifle could meet a reliability of 1 stoppage in 2400 rounds which is very much comparable to International Standards.

15 Nos. of Rifles are ready at RFI, Ichapore for User and DGQA evaluation and awaiting for Trial Directive from Dte. of Infantry for further action.

11. License Agreement has been signed on 12th Jan 2016 between GOI and M/S SAAB, FFV Ordnance AB, Sweden, for supply of three new types of ammunition viz., HEAT-751, HEDP-502 & Smoke-469C alongwith a License agreement for transfer of Technology (TOT) for use with the Carl Gustaf weapon system.

R & D
1. Electronic Point Detonation Fuze: In-house R&D project on Electronic PD Fuze was taken up by Ordnance Factory (MPF) to fulfill the RFP requirement of Indian Army. At present Electronic PD Fuze is being imported by ECIL for Indian Army. “This is the first indigenous successful effort by OFB.

Dynamic trial of 155 mm Eletronic PD Fuze developed by OFB (MPF) took place at PXE Balasore. The first trial has achieved objectives and was successful.

It is planned to manufacture a pilot lot of 125 Nos. which will be subjected to firing trial in association with DGQA in January, 2017.

One important development is that as per DPP-2016, OFB no longer enjoys the status of nominated production Agency (PA) and therefore, OFB has

to participate in RFPS and compete with Indian/Global private/public Industries. Keeping this in view, OFB is making efforts to have a tie up with technology providers to acquire TOT.
Accordingly, OFB has forwarded a proposal of Generic MOU for approval of MOD. Apart from the above, following proposals have also been forwarded to DDP.
* MoU with M/s ATK for production of 30 mm Gun & Ammunition
* MoU with M/s BAE, UK for production various caliber of ammunition
* MoU with M/s BAE, Sweden for production of MGS
* Umbrella MoU with M/S BEML
OFB is also making its presence felt at various conferences and seminars being conducted by CII, FICCI etc

Challenges before the Ordnance Factories.
As mentioned earlier the entire workforce of the Ordnance Factories are always kept under tension and stress, by regularly subjecting them to different types of threats through report of various Committees such as Nair Committee, Kelkar Committee etc., for Corporatizing Ordnance Factories, by opening the Defence Production Sector to 100% Privatization through DPP-2013 and once in a decade threat in the name of noncore items and low technology items, allowing FDI etc. In this regard we would like to place the following views on each of the above threats for the kind and favourable consideration of the Hon’ble Defence Minister.

1) The more than 2 centuries old organization has effectively remainded as a Government Organization since Ordnance Factories are set up for strategic reason mainly as the fourth arm of the Defence of the Country and to achieve self reliance and indigenization in Defence Production. Ordnance Factories are not set up for doing commercial business and minting profit. The strategic requirement and existence of the Ordnance Factories should be treates at part with the Armed Forces. Therefore, in the interest of national security, this Federation and the other Federations in the Defence Ministry have taken the correct stand that Ordnance Factories should remain as a Departmental Organization. Any disturbance in its structure like converting the Organization into a Corporation as recommended by the Nair Committee and Kelkar Committee will ultimately result in the Ordnance Factories becoming sick Industries which is not in the interest of the security of our Country. In the past whenever the Government has thought about converting the OFB into a Corporation the 4lakhs Defence Civilian Employees have always opposed this move of the Government. In this regard we draw the kind attention of the Hon’ble Defence Minister to the assurance given by the then Def. Minister Shri. George Fernandes in a meeting taken by him on 18.07.2001 with the Federations. The extract from the minutes of the meeting is given below:

“Raksha Mantri, while appreciating the sentiments of the Staff Side on issues of national security etc. intimated the Staff Side that there is no proposal to privatize the Ordnance Factories. He reiterated the Government’s Commitment to full utilization of the installed capacities of the Ordnance Factories, and their growth. He asserted that the first choice for productionising any equipment, was always Ordnance Factories and Defence Public Sector Undertakings. R.M. also mentioned that there was no proposal for corporatization of Ordnance Factories function under the control of the Ministry of Defence and shall continue to do so. He also stressed that there would be no FDI in Ordnance Factories.We also draw your kind attention of the assurance given by the then Defence Minister and the Present Hon’ble President of India Shri. Pranab Mukherjee in a strike negotiation meeting held under hos Chairmanship on 18.09.2006. The extract of the minutes of the meeting is reproducted below:-
“The Government has not decided to corporatize Ordance Factories and that there is no intention to implement the recommendation.”
“Government does not intend to dilute the role of Ordnance Factories and DPSUs in Defence Production.”
“Hon’ble RM accepted the suggestion to have a frequent interaction at the level of Secretary (DP) and other Senior Officers with the representatives of the Federations, which will improve mutual understanding and provide cordial working environment.”
We also invite your kind attention to the minutes of another meeting held under the Chairmanship of the then Defence Minister Shri. A.K.Antony on 26th June,2007 with the three Federations. The relevant portion of the minutes is reproduces below for your kind information please:-
“Allowing the private sector to enter in the Defence Production Sector will not create any situation that will damage the interest of either OFB or Defence PSUs. RM further observed that the Federations were opposed to corporatization of OFs, his predecessor had categorically assured them that there was no intention to implement the recommendation of the Kelkar Committee relating to corporatization of Ordnance Factories. He said that the present policy is the same.”
Apart from the above the Ministry of Defence, Department of Defence Production have informed in the Rajya Sabha vide Unstarred Question No. 833 (Answered on 03.03.2015) that “there is no proposal at present to corporatizw the Ordnance Factories in the Country and since such a proposal is not there the issue of taking the Federations of the Defence Civilian Employees into confidence does not arise.”

Morover, the Department of Defence Production vide Letter F. No. 15(4)/2015-D (Esst./NG) dated 15th April,2015 has informed that at present there is no proposal to corporatize the Ordnance Factories.
In view of the above the three recognized Federations appeals to the Hon’ble Defence Minister that Corporatizing the Ordnance Factories is not going to help the organization in any manner. Moreover, this will abruptly change the service conditions of the almost 1 lakh civilian employees which will result in unneccessary labour unrest and litigations. Moreover, an analysis of the Defence import over the years indicates that most of the imports have been made in the areas other than Military hardware produced by OFB. Infact the import of Air Craft, Naval Ships and other equipments are substantial and these fall in the product range of DPSUs like HAL, Ship Yards, BEL etc. Therefore, the argument of import replacement for conversion of OFB into a PSU may not neccessarily address the issue of self reliance. Moreover, the investment made at OFB should be construed as a War Reserve / War Insurance to the nation and as already mentioned OFB is the fourth arm of the nation and it is a strategic asset of the Country.
Apart from this the Hon’ble Minister may also consider the following negative aspects, in case the Ordnance Factories are corporatized:-
a) Today OFB being an integral part of the Government, OFB is obliged to make all types of equipments demanded by the Army irrespective of its number or value and also whether commercially viable or not. If it is corporatized OFB also will adopt its own business/ surviving strategy and will go only for producing those items the volume of which is more through which they can earn profit. This is not in the interest of Armed Forces.
b) At present OFB provides lifelong warranty for weapons and other systems produced by them. If it becomes a Corporation then Armed Forces should be forced to pay for maintenance/ servicing since the warranty period of the equipment will get over by the time the items reach the Depots/ Units.
c) At present OFB issues the products on no profit basis. If Corporatized the items will be issues on cost plus profit basis and International pricing strategy for Defence Equipment will be applied.

Hence, we are of the firm opinion that the OFB should continue as a Departmental Organization under MoD and we suggest the following for further strengthening the Ordnance Factories so that it fulfills its commitment and duty as a Defence Production Organization in an effective manner to the fullest satisfaction of the Armed Forces.
OFB should become a solution provider to Indian Armed Forces.
OFB should remain as an integral part of Defence Management of the Country.

* OFB should continue to be a reliable partner of the Indian Armed Forces by providing life cycle support to the equipments.

* Integration of Finance, Accounts and Internal Audit with OFB.

* A mechanism to be derived for maintaining proper co-ordination between DGQA and OFB both at the apex level and Factory level for ensuring a Better Quality Management System.

* OFB should be empowered to select technological partners.

* Long term Roll-on indents for all items of production.

* Grant of design agencies status to speed up in house research and development efforts.

Therefore, we conclude that the Ordnance Factories may continue as a Departmental Organization under MoD. Any decision on the part of the Government to corporatize Ordnance Factories would amount to a violation of the assurance given to the Federations by the Government of India and will result in a confrontation between the Government and the Defence Civilian Employees. We are confident that the Hon’ble Defence Minister will take all efforts to avoid such a situation when the border of the country is in serious tension and the requirement of the day is to ensure that all of us rise to the occasion and strengthen our Armed Forces.

Sir, we request you to kindly spare a bit of your valuable time so as to enable the representatives of the three Federations to meet you and express our views in this regard.

Yours Sincerely,

C. Srikumar
General Secretary/AIDEF

R. Srinivasan
General Secretary/INDWF

General Secretary/BPMS


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