OF B Reforms: Time for a Strategic Shift

Sub Title : The reforms aim to streamline the functioning of the 41 Ordnance Factories

Issues Details : Vol 15 Issue 3 Jul – Aug 2021

Author : Lt Gen N B Singh, PVSM, AVSM, VSM, ADC (Retd)

Page No. : 48

Category : Military Affairs

: August 5, 2021

The Government has approved the corporatisation of the Ordnance Factory Board (OFB), a plan which was first mooted two decades ago to streamline the functioning of the 41 ordnance factories across the country. With the right direction and appropriate strategy, OFs  will surely be able to trail blaze a new course and  provide quality weapons and equipment for the Indian Armed Forces

On 16th June the Union Cabinet approved a much-debated plan to corporatize the Ordnance Factory Board (OFB) under the Companies Act. The Kolkata based OFB has 41 Ordnance Factories (OFs) under its fold and is to be reorganized into seven corporate entities on the lines of defence public sector undertakings (DPSUs) based on the nature of manufacturing and technologies.  The principal argument of the Govt has been that this will give factories the autonomy needed to improve productivity, quality, deepen specialization and enhance competitiveness. The new DPSUs will be grouped as under:-

  The ‘Ammunition and Explosives Group’ comprising  factories  producing ammunition and explosives.

  The ‘Vehicles Group’ having factories manufacturing tracked and wheeled  combat and logistic support vehicles.

  The ‘Weapons & Equipment Group’ having under it  factories engaged in production of all type of armaments.

  The ‘Troop Comfort Items Group’ consisting of  clothing and equipment factories that manufacture uniforms, boots, mountaineering gear and tentage.

  The ‘Ancillary Group’ dealing with metal items like forgings, castings, cartridge cases etc.

  ‘Opto-Electronics Group’ manufacturing all types of sighting systems.

  The ‘Parachute Group’ with  the sole factory at Kanpur manufacturing parachutes.

OFs have been in existence since 1775 and have been primarily meeting  requirements of the armed forces along with the DPSUs. Lately, these have come under adverse criticism from the military for the quality and  reliability of products being provided with huge time and cost overruns. In a changing technological and economic environment, OFB led by the Chairman should have provided the strategic direction in concert with the Department of Defence Production (DDP), to adapt and remain competitive by creating modern industrial capabilities, futuristic products along with next generation core competencies. This, however, has been found wanting.

At the grass route level too, the OFs  faltered in not absorbing transfer of technology comprehensively, retaining critical dependencies on suppliers abroad thereby losing control on costs and delivery schedules. Even after three decades of manufacturing, many components continue to be on the import list. What is intriguing is that certain platforms being manufactured for the past several decades, are still  being rolled out in the same obsolescent configuration without any capability enhancement. Staffing pattern in OFBs is heavily skewed towards supervisory staff rather than skilled workers- spiking overheads. The practice of overtime has added to the salary bill.

Facilitative Provisions

An Empowered Group of Ministers  has been constituted under the Chairmanship of Minister of Defence to oversee and guide the transformative process  including transition support and redeployment  of employees with necessary  safeguards for  their wages and retirement benefits. Although right now the ownership of these companies is 100% with the Govt, it  is presumed  that subsequently they would get necessary dispensation to forge partnerships with the private sector. OFs have vast estates and huge assets in the form of human capital, intellectual property, plant and machinery, buildings, etc. These assets must be leveraged by them in developing partnerships and creating joint ventures like Brahmos. Principle of empowerment requires that OFs should be allowed to take decisions in a business  like manner without any interference and are held accountable for their performance. The following are some enabling provisions :-

  In order to ensure that the transition is without major disruptions a number of past practices like taking  orders on nomination basis for products in current portfolio  or where it is a designated production agency for development  will continue. In Make Category, Buy and Make Category, special preference of 15 % above L1 price would be given.

  Working capital for next 5 years is to be provided by DDP. One time corpus fund will be provided along with capital investment for ongoing and sanctioned projects. In addition, it will be given funding  from Technology Development Fund set up by GOI. The Government will provide sovereign guarantee for raising of loans.

  GOI will take liability for pension arising out of the current serving employees and   ensure that there is no political interference in its functioning. No Proposal of OFB would be required to be routed through DDP once approved by the Board.

A Shared Belief

It is important that this transformation is carried out with a difference using a new corpus of thoughts. Whatever didn’t work in the past has to be done differently. The easy way out could be the templated approach  to adopt  practices prevalent in DPSUs like HAL, BEML, etc. This approach may at best lead to incremental improvements. But if long lasting changes are to be brought in, a strategic shift  is the need. Corporatization should commence with the shaping of an organizational culture. A shared  belief that DPSUs are an extension of the military and that their products are for securing India is imperative. They need to convince themselves that they constitute the cutting edge because without fail safe and mission capable weapons, the armed forces cannot remain operationally effective. Organizational culture is a big challenge in Govt enterprises as it is difficult to build ownership and alignment in the workforce to implement a change. There is an overall deficit of ethics, values, practices and working environment to develop high workplace morale and highly productive staff. Cultures could be collaborative, innovative, high performing, trusting or transparent. I would recommend  a collaborative and trusting work culture for these newly formed entities, where they understand the larger corporate aim Defending India, not maximizing profits and work towards gaining  trust of the military, the way shipyards have earned the trust of Navy. Not easy to accomplish, given the divergent and frequently drifting requirements of the main customer, the Army.

PPT Framework

The people, process, technology (PPT) framework has been around since the early 1960s. For any meaningful organizational transformation and management, PPT is necessary. To achieve organizational efficiency one needs to maintain a balance between the three and drive actions accordingly. The new DPSUs could start by focusing on PPT, adopting a collaborative stance with a commitment to provide technologically superior weapons to the military; not merely completing targets and seeking payments. A sustained culture of innovation to adapt foreign designs to Indian conditions is a sine qua non for  the OFs.

   People. The workforce has to develop a systems view (cradle to grave) and acquire next generation competencies. Highly skilled leaders and technicians from the three services need to  be brought into these enterprises; they will bring with them the collectivist culture of team work and loyalty with focus on performance and provide the moral compass for their civilian counterparts to excel. Weapons crafted with passion and belief that these will enable the soldier to protect national borders will seldom fail.

   Process. High quality systems are manufactured with a strong emphasis on process. Frequent deviations in  manufacturing processes, materials, lack of cleanliness at the workplace and an overall inability to adhere to OEM`s process documentation have adversely impacted OFB manufacture. These have to change through increased automation, modernization and single minded dedication to deep engineering, technical ethics and values. The current process of TOT absorption in OFs is like a fatal golf swing, mostly missing the fairways for the woods.

   Technology. The fact that thirty years  after the first tank was rolled out, these are still being produced  without any technology insertion aptly illustrates the generalist and bureaucratic work culture at OFs. If OFB leadership had been tech savvy and looked at capability enhancement of their products, modernization of the military could have smoothly progressed. During the eighties the Indian Army was the first to replace the 100 mm main gun of T55 with an indigenous 105 mm tank gun courtesy some outstanding innovative and collaborative work done by EME and DRDO under Project Sunflower. If the tank factory at Avadi had considered making the T72 missile capable, a comprehensive modernisation programme  could have commenced in the last decade in place of the current band aid upgrades, giving mechanised forces a greater operational edge. Investments in robotics, IOT, 3D printing, augmented reality etc can enhance quality, productivity and repeatability.

The transformative process  has to be accompanied by a strategic plan; a well defined roadmap formalised at the MOD on what is to be done. The current entropy is mainly due to the siloed working and absence of strategic leadership at MOD. A conglomerate of 41 OFs and several DPSUs  led by a visionary leadership, could have made India self reliant several  decades ago. Atmanirbhar Bharat in defence has to be strategized at the higher defence management level- DPSUS and OFs cannot be left as freewheeling entities. The Technology Development Fund and  IDEX programme  can effectively become a mechanism to incubate sub system level technologies for the future. A Defence Technology Strategy and a Defence Industrial Strategy   put in place by a group of knowledge leaders can become the guiding documents to turbocharge  Make in India in the next two decades.

Defence Technology Strategy (DTS)

Through history technology has played a key role in launching capability surprises on the adversary besides impacting war fighting doctrines. Innovation has provided the critical mass in ushering this change. The doctrine  of Blitzkrieg, Airland Battle came into being due to the spectacular capabilities provided by technology to land and aerial platforms. Science and technology is a vital enabler of any country`s national defence capability. The DTS can provide the direction and clarity on next generation cross cutting and underpinning technologies that need to be worked upon using Govt investments on R&D. It is pointless Govt investing on common technologies  available from foreign sources. Instead, it makes sense to go in for outright purchase of technology and enhance capabilities through innovation. This is precisely what Israel and South Korea have done. The DTS should clearly set the direction of research and ways to move promising research into the development pipeline. Maintaining R&D investment at an appropriate level is the key to next generation capabilities and national competitiveness and needs to be pegged at minimum 2%.

Defence Industrial Strategy (DIS)

The DIS should provide clarity to establish and promote a dynamic, enduring and world class defence manufacturing base. The indigenous market for defence equipment and services is one of the largest in the world and our track record of imports reinforces the need for a broad-based and sophisticated defence industry. The complex, technologically challenging and high-value systems which have been acquired will see service for a major part of this century. This places increasing emphasis on an industrial capability to support and upgrade these through life by technology insertion. The defence  industry will have to be of global standards, looking at the wish list of the military and their general preference for systems crafted abroad. There is a need to consider carefully which industrial capabilities need to be created within DPSUs from strategic assurance and influence angle and what can be developed in the private sector .

Collaborative Strategy

There is a need to develop a collaborative strategy with meaningful public private partnership rather than the competitive approach adopted at present. It is sheer waste of national resources to make several public and private companies develop prototypes like a light tank or FICV and  evaluate these to select one, over several years of testing and trials. Instead, the combined might of the Govt, scientific community and industry should be put behind a single design with the aim of achieving system maturity and system readiness to deploy in compressed time frames at affordable costs. This approach will help  shape the industry to become globally competitive and self sustaining. A rich knowledge base to manufacture complex weapons and munitions is only available with  OFs, acquired over several decades. The private sector will take years to develop this knowledge cache. It needs to be consolidated not dissipated.

Domestic production will reduce foreign exchange costs for imports, provide self-sufficiency against the risk of arms embargoes and facilitate adaptation of foreign system designs to meet peculiar Indian  requirements. Post Yom Kippur war, Israel which was dependant till then on imported systems  made the shift by focussing on industrial  capabilities and competent scientists, engineers and technicians. Growth of the defence industry was achieved by a blend of imported technology and Israeli innovation. Israeli firms purchased manufacturing rights and entered into collaborative ventures with foreign companies to manufacture full systems and components mostly with Govt support. Emergence of Government-owned conglomerates like Israel Military Industries, Israeli Aerospace Industries, Rafael Advanced Defence Systems along with a host of private companies, illustrates how a well planned and efficient government intervention can facilitate establishment of a versatile defence industrial base and consolidate technology security. One hopes that with the right strategy, OFs will be able to trail blaze a new course and provide the gallant Indian soldier weapons which are qualitatively superior and fail safe, giving an aura of invincibility to the military.