Mooted in 2000, Ordnance Factory reform piloted by Rajnath Singh in a year’s timeframe after PM’s Mann ki Baat of 28 June 2020.
Seizing opportunity in a crisis is the hallmark of leadership. The Narendra Modi team literally walked the talk when it was announced during the past week that 41 production units of the 220-year-old Indian Ordnance Factory organisation, with assets worth Rs 79,271 crore and standing order books worth Rs 52,000 crore will be split into seven corporate entities to boost the Aatmanirbhar Bharat programme. Initial announcement was made during a crisis management press conference by Finance Minister Nirmala Sitharaman in mid-June 2020. Narendra Modi chose to devote time to this subject in his Mann ki Baat radio broadcast on 28 June 2020—Cabinet approval was granted and an empowered Extended Group of Ministers (EGoM) was set up under Raksha Mantri Rajnath Singh on 11 September 2020—the selection of a consultant for the acclivity having been initiated in July, soon after PM’s broadcast. On 21 September 2021, the Defence Ministry notified the changes, heralding a new era in defence production and effecting a paradigm change in the industrial horizon of India. And this yeoman task was carried out while combating the scourge of Covid.
Over the past two decades, several committees like T.K.A. Nair Committee, Vijay Kelkar Committee and Raman Puri Committee, which studied reform of defence production inter-alia recommended that Indian Ordnance Factories should be converted from a government department into a corporate entity. The speed with which the Mann ki Baat entered the realm of implementation was not only a clear example of walk the talk, but perhaps one of the fastest implementation of a policy announcement.
In his Mann ki Baat the Prime Minister had said, “Friends, before Independence, in the realm of the defence sector, our country was ahead of many countries in the world. There used to be a multitude of ordnance factories. Many countries that lagged behind us then, are ahead of us now. After Independence, we should have made efforts in the defence sector, taking advantage of our prior experience…we did not. But today, in the fields of defence and technology, India is relentlessly endeavouring to advance on those fronts…India is taking strides towards self-reliance.”
The reason for Modi’s lament was perhaps the fact that while in 1947 India had inherited a robust defence production base, there was no matching infrastructure in Pakistan. Jawaharlal Nehru and Sardar Patel ensured all areas of the subcontinent, which had ordnance factories, were integrated into India. As Pakistan materialised as an ally of the West in the emerging Cold War, the British helped them to set up a fledgling ordnance factory at Wah cantonment in (the then) West Pakistan in 1951. Pakistan, while benefiting from arms aid from US and China, has meanwhile also surfaced as an exporter of armaments, especially to West Asia. Modi’s lament that those who lagged behind us are ahead today may have emanated from this.
At the time of Partition India had 18 ordnance factories. 23 have been added since Independence. India’s 18 ordnance factories provided sinews to the Allied endeavour in the Eastern Sector during the Second World War. Not only Indian soldiers but the effort of India’s defence workmen contributed significantly to the war effort. During partition, all 18 units remained in India. Post-Independence, Nehru’s pacifism was reflected in the decline of attention on munition production. In the years leading to the 1962 debacle the ordnance factories continued routine production of traditional arms and ammunition. Vehicle manufacturing was added to its kitty with tie-ups with Germany’s MAN and Japan’s Nissan—the Shaktiman trucks and versatile Jonga jeeps emerged. Earthmoving equipment for the Dandakaranya project were made by OFs. India’s first air-conditioning equipment and high capacity pressure cookers (for troops) were also made.
The 1962 setback saw the setting up of Department of Defence Production—the then Director General of Ordnance Factories, Rear Admiral Daya Shankar, was promoted and appointed Controller General of Defence Production—precursor to the present post of Secretary (Defence Production). Thereafter ICS and later IAS officers headed defence production department, while OFB officers’ cadre manned the factories. In 2020, UPSC stopped recruitments to the Indian Ordnance Factories Service (IOFS) soon after consultancy firm KPMG began the present corporatization exercise.
After 1962, working in tandem with defence research laboratories and inhouse reverse engineering by OF technologists a semi-automatic rifle was developed at Ishapore and the Indian Field Gun and Mountain Gun emerged by the time India was engaged in its next war, in 1965, with Pakistan. In 1971, apart from Soviet supplies and surreptitious Israeli munitions, India’s indigenous munitions were the mainstay of the armed forces. Post 1971 India exported munitions primarily as aid to the liberation struggles in Africa. Janes Defence Weekly listed Indian equipment as testimony to their efficacy. It is this glory, which evaporated after 1980s with dependence growing on imports and inability of OFs to live up to their past excellence, which perhaps prompted Modi to make a reference to ordnance factories in “Mann ki Baat” and set in motion the process of revival.
In April 1979, following recommendation of a committee headed by former Hindustan Lever Chairman, Vasant Rajadhyaksha, the Ordnance Factory Board was created—a semi-corporate entity, which continued as a wing of the Department of Defence Production. Prior to that, OF expenses were dovetailed to the Armed Forces budget. The financial autonomy delinking from forces’ budget proved to be a nadir as OFB could not live up to competition in terms of pricing.
Also in 1979, a Field Gun Factory was set up in Kanpur to augment the capacity which existed in another factory in the same location. It was rated as the best engineering unit of its kind east of Suez—the Indian version of Bofors gun, “Dhanush”, which showed its prowess in Kargil, is made here. In 1980s, a tendency to import rather than produce at home became the paradigm of defence procurement. Scams like HDW submarine deal and Bofors ensued—bringing in their trail a paradigm change in India’s political horizon itself. Three decades of political instability was perhaps reflected in the decline of indigenous procurement and reliance on imported equipment. So much so that India, which has the third largest defence budget in the world, is dependent 60% on imports today.
Ordnance production in India traces its history to the days of the East India Company—in 1775 a Board of Ordnance was set up in Fort William, Calcutta. In 1787, a gun powder factory was set up on the banks of Hooghly river in Ishapore, 25 miles north of Calcutta, adjacent to India’s oldest cantonment, Barrackpore (where Mangal Pandey lit the flames of the 1857 uprising). In 1801, a gun manufacturing unit was set up at Cossipore, north Calcutta. In 1899, a Hague declaration had to be issued internationally banning the lethal Dumdum bullets which were made near Calcutta.
India’s ordnance factories had an umbilical link with the British Royal Ordnance Factories (ROF), which were corporatized in 1985. Royal Ordnance plc, the listed company which ensued, was merged with British Aerospace in 1987 and BAe Systems, an integrated defence production giant emerged. In Britain, the First Division football team, Arsenal FC, is perhaps the most visible remnant of ROF (it was set up by munitions workers of Woolwich in 1883). The land estates of ROFs are redeveloped into better productive use, while factories are efficiently producing weapons and equipment under corporate ownership. The announcement of corporatization of Indian factories identified 16 land parcels totalling 3,152 acres of land which will now be available for monetisation. The assets of OFB which are available since the corporatisation on 1 October 2021 can be put to effective use. A handholding package of Rs 2,500 crore for the seven new entities which the Cabinet has mooted can perhaps be financed to a large extent through this sui generis method.
The leadership teams of the seven new entities are manned entirely by officers of the OFB’s IOFS cadre. The government taking care of service conditions of the dissolved entity’s officers, staff and workmen is laudable.
However, as criticism against OFB emanated from the quality of managerial resource available in OFB it remains to be seen how effective the new companies’ managements will be. Public sector top brass are usually appointed by the Public Enterprises Selection Board through open newspaper advertisements. This process has been bypassed in the ab initio stages of the seven new defence production PSUs: the long-term effect of this short-circuit will be interesting to review. Corporatization not only of assets but also of managerial mindsets is crucial.
Soon after PM’s broadcast last year while writing in The Sunday Guardian this writer had ventured to suggest the government may like to study the British model of corporatization as well as take an omnibus view by looking at the United States’ DARPA—Defence Advanced Research Project Agency—which is tasked with making pivotal investments in breakthrough technology for national security. DARPA was set up in 1958 by President Eisenhower after Soviet Union shot its Sputnik into space in 1957. Narendra Modi’s 28 June 2020 “Mann ki Baat” can be India’s Eisenhower moment if the mandate is extended beyond corporatisation of Ordnance Factory Board. India’s private sector must step in to augment DRDO in defence research and armament development.
The announcement of the winding up of OFB was made on a day when the Artillery Regiment was celebrating its annual “Gunners Day” (it was 158th Gunners Day this year). In previous years, OFB used to put out huge newspaper adverts to greet Gunners Day. Not so in 2021.
An advertisement did appear—it was inserted by an American firm, BAE Systems (which owns erstwhile Royal Ordnance Factories of UK, Sweden’s erstwhile Bofors as well). It showed the state of the art M777 light howitzer which BAE has supplied in tandem with their Indian partner, Mahindra Defence Systems, being ferried to forward positions on a US-supplied Chinook helicopter. The real tribute to Aatmanirbhar Bharat will be if in future Indian entities are able to showcase their hardware on anniversaries like the Gunners Day.