To make India self reliant in the defence sector, the Ordnance Factory Board (OFB) has been split into seven different companies. Prime Minister Narendra Modi has dedicated these seven companies to the nation. The new Defence PSUs are 100 percent government owned corporate entities and will help in improving the country’s self-reliance in defence preparedness.
Business in the seven new entities started from October 1, 2021. These new companies are: Troop Comforts Limited (TCL); Yantra India Limited (YIL); Gliders India Limited (GIL); India Optel Limited (IOL); Advanced Weapons and Equipment India Limited (AWE India); and Armoured Vehicles Nigam Limited (AVANI).
“Restructuring of Ordnance Factories and creation of seven companies, would play an important role in import substitution, in line with the vision of ‘Atmanirbhar Bharat’.
The new companies now have an order book of Rs 65,000 crore. These orders were in the pipeline and have been shifted to the new entities.
The PM in his address cited Defence Corridors in Tamil Nadu and Uttar Pradesh as examples of the new approach. In the last five years the defence exports, have touched 325 percent and due to policy changes new opportunities have emerged for the youth in the MSMEs.
The growth and brand value of any company or nation is based on its R&D and innovation, the new companies should take the lead in future technologies. These new companies have complete functional autonomy and the interests of the employees are fully protected.
The Centre, in May 2020, had announced increasing the FDI limit from 49 per cent to 74 per cent under the automatic route in the defence sector.
According to Defence Minister Raj Nath Singh, the move to create new companies is a reflection of the government’s commitment to Atmanirbhar Bharat. restructuring of the OFB, is to transform the Ordnance Factories to improve expertise in product range; profitable and productive assets; ensure self reliance; enhance cost effectiveness and improve quality and increase competitiveness.”
He also voiced the government’s resolve of creating India as a defence manufacturing hub and net exporter. This can be achieved through the active participation of the private sector, setting up of defence manufacturing units as well as creating joint ventures. According to the defence minister, “To enhance preparedness of the armed forces, the public and private sectors are working hand-in-hand.”
The members of Society of Indian Defence Manufacturers (SIDM) HAVE welcomed the creation of seven new companies and expressed that the industry is looking forward to doing business with them. These new companies will adopt corporate standards for their commercial activities. This includes tendering, contracting to payment systems etc. and vendor development.
The government has been emphasising boosting indigenous defence manufacturing. The Ministry has set a goal of a turnover of $25 billion (Rs 1.75 lakh crore) in defence manufacturing by 2025 that included an export target of $5 billion (Rs 35,000 crore) worth of military hardware.
While the level playing field doctrine has encouraged companies like L&T, Mahindra & Mahindra, Godrej & Boyce, Tatas and a number of IT companies to come in, the paltry 26 per cent FDI hardly enthused any major OEM to set up a production base in India. The government then announced an offset policy in 2006 to leverage India’s big-ticket acquisition to get outsourcing, export orders and critical technology from major global defence manufacturers. The experience so far has been dismal, except for some outsourcing orders for low-tech items.
The Corporatisation of the OFB has to be seen in the overall context of improving India’s military industry capability, self-reliance quotient, design capability in critical systems and quality, time and cost-effectiveness and involvement of private players in defence manufacturing as partners in tandem with OEMs and design houses. Research cannot be the monopoly of the DRDO. The private sector, academia and reputed design houses must be part of this process, which will improve India’s design capability significantly.
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