CORPORATIZATION OF OFB – THE UNKNOWN ANGEL

suryakiran

Team StratFront
Dec 1, 2017
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1,051
Bangalore
Corporatization of OFB - The Unknown Angel
By Lt. Gen. P R Shankar (Retired)

General
Corporatization of OFB and ‘not privatization’ repeat ‘not privatization’ of OFB was announced with emphasis by the Finance Minister as one of the big bang reforms being undertaken in the Defense Sector as part of the Atma Nirbharta campaign. I welcome it whole heartedly. It is more than time for this reform to happen. However in the past few days the social media is flooded with views and suggested SOPs to corporatize the OFB. One look at the SOPs, suggestions and arguments which are floating suggests that these are attempts by vested interests to hijack the agenda. Some are apparently from within to maintain status quo to live happily ever after. Some to craft a new system to the insidious advantage of the chosen few. That is when I thought that I should throw in my hat in the ring and weigh in my opinion despite all that is happening in China and about the Virus. For a change they can wait. To my mind there are some serious issues which merit attention. These issues should be resolved by the corporatization process.

Quality
The OFB has been notorious for its lack of quality. Poor quality is compounded by systemic lack of responsibility and accountability. The nation has paid very dearly for this. Let me elucidate. Poor quality of ammunition has been endemic. It has led to a staggering number of accidents. Result. Loss of lives, limbs, and morale. Weapon systems destroyed. Immediate cost. Lifelong compensation to victims. Recruitment and training cost of individuals to replace casualties. Replacement cost of weapons at current rates. That itself is quite a bit but it is still only the superficial loss. An ammunition accident means segregation of a lot of ammunition (which could be in thousands in numbers). So the cost of that entire lot of ammunition is lost. That much ammunition is not available for operations. An order is given only after that ammunition is sentenced for destruction after a time-consuming inquiry. Means lack of operational capability till such time that many rounds come into the kitty after the ammunition is re-ordered and produced. The replacement cost for the entire lot will be later in time so inflation kicks in and the ammunition is now costlier. The old ammunition is then destroyed. So destruction costs are involved. Environmental pollution is endemic. Factor all these losses and it is staggering. It could involve a multiplicative factor of 3-5. No amount of increase in defense budget has been able to offset poor quality. OFB has been notorious for it since no one has been taken to task or held accountable for this gross and criminal dereliction of duty.

Nomination
OFB has been the go-to agency on nomination basis for any item which is within its production capability. This is as per law. In the absence of any alternatives and this binding and unquestioned assurance by the Government there is an inevitability of orders going to OFB. This has resulted in the OFB adopting ‘a could not care less and where else will you go’ arrogant attitude. It has also led to heavy over costing in league with some conniving and some ignorant but largely incompetent IFAs since there is no price negotiation or transparency. In one case of procurement of a weapon system, from a foreign OEM I did a cost comparison. Over a time span, the inflation rate of the Foreign OEM was about 10%. For the same period, the OFB inflation rates were about 100%. During my presentation to the DAC, the then Secretary Defence Production was pointedly looking away when these figures came up. The OFB has been a law unto itself where the user has virtually no say in the whole process. I have always wondered as to what kind of governance we have which allows itself to be perpetually skinned. Will Nomination continue when OFB is corporatized? That is the worst thing that can happen - a Corporate entity which is assured of orders without any responsibility, accountability, and competition.

Reputation
If one goes into the details of the Nalanda ammunition factory which was to produce modern Bi Modular Charge Systems for 155mm systems one will see the cost the nation has had to pay and will continue to pay ahead for the way OFB (mis)handles cases. The reputation of the OFB nosedives due to such cases. Till date all the units of the original intended factory have neither come up nor are the ones which were built functional. This is because that factory has never been completed, since the Government has not been confident of the veracity of issues involved due to poor reputation of OFB. We are going in with great pride for many 155mm guns. Very shortly we will be faced with the situation when we might have guns but not the charge systems. I am sure someone will do a scramble after this to get all their Ps and Qs right to negate what I am pointing at. The fact remains that we are still hollow and continue with the quick fixes, untenable solutions, and glib explanations which will count for nothing when a firefight breaks out and we find that we have guns without ammunition.

Pride
The OFB has a low threshold on pride. In fact it has extraordinarily little. Strong words? Let me prove the point. From around 2010, we went all out to come up with the Dhanush 155 mm Gun based on a TOT of the 155 mm Bofors, which OFB had held for over a quarter of a century. After going through all tribulations and trials we come up with the Dhanush. In my opinion the 155 mm Dhanush is a top line gun. Indigenous. Something to be proud of after 35 years. Dhanush was the rising and setting sun, spoken of, and quoted as an unqualified success by OFB in every forum. It was having teething troubles and that bis par for the course. We would have got over it. However the OFB was seemingly happy that the Government was going in for over 1100 guns of an inferior quality from a foreign supplier with TOT to OFB! It eventually meant that the Dhanush would be sidelined. Look at that. The OFB was prepared to throw out its baby and the bathtub and be content with producing an imported Gun. Thank god for Corona Virus. I do hope that we cancel that intended order and the PM, RM, CDS, COAS and OFB Chairman sit down and get to ensuring that the future of Indian Army revolves around the Dhanush till such time the ATAGs come up. Otherwise Atma Nirbhar Bharat will be a joke on the nation.

Relationship with DRDO
The relationship between DRDO and OFB has always been testy to put it mildly. At the first hint of trouble, the speed with which the DRDO and OFB personnel point fingers blaming the other is like a shootout in a western movie. Clint Eastwood and Lee Van Cleef were never that fast on the draw. Over the years the relationship between these two establishments has been on a down slope for a variety of reasons. Their differences of opinion and egos has been costly for the nation. Challenge me on this and I can substantiate this with cases and facts. However this is a huge problem which needs to be addressed.

Leadership and Professionalism
I visited the Metal and Steel Factory, Ishapore, and Bharat Forge, Pune a few years back. The capability and professionalism of both were at par. In fact ESR Steel plant and radial forging capability at MSF was ahead in capability and professionalism. When people ask can we manufacture gun barrels, I feel everyone should be shown a video of radial forging of a metal ingot into a raw barrel in one go. Some capability. However I rated Bharat Forge way ahead since it had the dynamic leadership of Baba Kalyani. The difference that leadership makes to having an international reputation of quality is stark. The OFB has some exceptionally good professionals. Masters in the business of arms and ammunition who have contributed immensely to the Armed Forces. However, I have seen very few leaders in the OFB system. There are some. Few and far in-between.

Concomitant Reform
Another aspect which the Government needs to consider simultaneously is the concomitant reform of the MOD itself. After corporatization, the new OFB entity will be akin to a DPSU. What then will be the role and responsibility of the DGQA? That organization will also need a corresponding change. Further the role of the Secretary, Defence Production also needs a relook. There is a strong case for the Department of Defence Production to be a bespoke organization at arm’s length from the MOD. The UK has such a system, I have always felt that the presence of the Secretary, Defence Production on the Defence Acquisition Council is tantamount to insider trading.

Conclusion
I was once discussing the offset options in a case with a foreign OEM. He had chosen OFB as an offset partner. I asked him why? He said, “Sir the capability of OFB is something which nations can only dream of. It is only India which has the luxury of ignoring it and coming to people like us”. That is OFB. We have a treasure trove which has underperformed and underdelivered to the nation. If the efficiency of the OFB is improved by even 50%, Atma Nirbhar Bharat will be 100%. Anything more, India can be a leading arms exporter. However for all this to happen, the OFB needs to be corporatized in a proper manner. Admiral Raman Puri (retd) , ex VCNS had written an excellent report about how to go about corporatization and privatization. I do hope some heed is paid to that. We cannot have the existing Board converted into a corporate structure with the same lot. That is old wine in new bottle. Knowledge-based leadership and professional management is the requirement of the day. Bring in talent from outside. Also, this exercise should not end up as a post retirement sops for good boys being inserted as directors on the Board as is being done for DPSUs.

I have put all these points across since these are especially important for the restructured OFB to contribute towards ‘Atma Nirbharta’ effectively. If OFB is corporatized without a sense of moral integrity, will and determination and without addressing the root causes, the situation will only worsen. If only superficial issues are attended to, we might be better off with the known devil of the existing OFB than the unknown angel of the corporatized version.

Team Strategic Front - The above article is being reproduced with the permission of Lt. Gen. P R Shankar. His personal blog can be accessed at Gunners Shot - Gunners Shot


@Milspec @Falcon @vstol Jockey @Ashwin
 

Milspec

सर्वदा शक्तिशाली; सर्वत्र विजय
Moderator
Dec 2, 2017
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Great article and very much of my interest, I will respond to this thread soon when I have some time on my hand.
 
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RISING SUN

Senior member
Dec 3, 2017
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Why Corporatisation of ordnance board is a must
On 16 May 2020, the government announced the decision to corporatise the Ordnance Factory Board (OFB) to improve its autonomy, accountability and efficiency. It evoked an overwhelming response from the Armed Forces, which felt the step was overdue but suboptimal. Almost everyone wanted the OFB to be privatised on a PPP model. Simultaneously, there were discordant notes from within the OFB. The feedback indicated that the management and unions were both against the corporatisation decision.

Thereafter, the MoD started the process of hiring a consultant to prepare a corporatisation roadmap. Unions opposed the move and have now given a notice to go on strike from 12 October 2020. These events are happening when the Sino-Indian situation is tense with a likelihood of conflict escalation.
There is absolute clarity that the OFB is beset with major problems, the foremost being poor quality, high cost, lack of accountability, inordinate delays and a very poor work culture.

The Armed Forces have never been satisfied with the output of the OFB. Very specifically, the ammunition produced by it is often unreliable, unsafe and has lower-than-specified shelf lives. As a result, huge quantities of ammunition are destroyed or rendered non-operational. It adversely affects operational readiness. National security is jeopardised. This situation is unacceptable and must be arrested. There is no doubt that reforms are necessary. Past government committees even recommended full privatisation and breaking up of the OFB. Corporatisation is the minimum reform.

It is unacceptable that OFB unions are preparing to strike when the nation is almost at war. This is the time when they should be standing behind the Forces and ensuring that frontline soldiers have enough clothing, ammunition, weapons, guns and missiles to fight adversaries. The government should ban such strikes at this time. Are the workers being instigated by party politics or forces inimical to the nation? Is there a China hand behind the strike? There is obviously more to it than meets the eye. The worker unions should reflect—can the Armed Forces go on strike due to delayed supply of substandard ammunition and other warlike stores?

The OFB has not improved despite huge efforts in the past at internal reform. If this situation continues, the Armed Forces will refuse to use substandard OFB products. If corporatisation is resisted, the government may rely on the private sector to meet its needs. There is no choice. The management and workers of the OFB need to see corporatisation in the correct perspective. Corporatisation does not mean their jobs are being taken away or their livelihood is at stake. The idea is to improve efficiency and the image of the OFB that is at rock bottom.

There is a requirement for dialogue with the OFB as a whole. They should be made to understand the intent and necessity of corporatisation. It means turning the hidden potential and strengths of the OFB into a competitive profit system through better work culture like other DPSUs. It will actually benefit everyone in the long run. If the OFB must export weapons, there is definitely a requirement to improve its image internationally. That is feasible only through reforms.

There are, however, some issues involved. The workers need to be reassured and their fears allayed. Their jobs will not be lost. Reforms will only lead to better and enhanced capacities and result in an Atmanirbhar Bharat and more jobs. The second issue is to deal with the management that consists largely of the IOFS cadre. These officers might not fit into a corporate entity. Hence some options of lateral entry into other government departments have to be thought of while fresh blood is brought in.

Appointment of a consultant to recommend the corporatisation roadmap must be done with care. Foreign ones are best avoided. The OFB is a huge strategic asset. It has tremendous strengths that should be kept under wraps. Our workers are experienced. Our future plans should be safeguarded. Its transformation will take time. It should be done deliberately, in phases, with care. Reform should be as per our conditions, culture and practices. The expertise to reform exists indigenously. Further, there is considerable pre-corporatisation groundwork required. Certain structural changes should be carried out even before the consultant comes into the scene.

The Board can be given financial powers equivalent to other DPSUs. The OFB can start functioning under clearly visible and foreseen verticals. The financial advisory & audit and the quality assurance systems can change. An implementation committee should be appointed to oversee the transformation on a time-bound basis. People who wrote previous reports on reforming the OFB are still in circulation. They should steer and execute what they had recommended! All stakeholders must be part of the reform. Reluctance of workers seems to be a fear of the unknown.

A major problem of the OFB is the disconnect and insensitivity to users. A greater connect between the Services and the OFB must commence. There is a strong case for the DDP (MoD) to be a bespoke organisation. Mere reform of the OFB alone won’t do. The MoD must also undergo a concomitant reform. The OFB is a national strategic asset with eroded roots. It needs a rebuild. If the rebuilding is done effectively, India will benefit immensely. To quote an equivalent, state-owned enterprises in China used to be called their ‘Rust Buckets’ till the 90s. After reforms, they are now the engines powering China to superpower status.

It is time the OFB sheds its rust bucket image and becomes India’s growth engine.(The author has guided important projects like the Dhanush 155mm gun system, streamlining of BMCS plant, making up artillery ammunition shortfalls, manufacture of Pinaka rocket systems and other new initiatives of the OFB)
 

Nikhil

nik141993
Dec 1, 2017
503
293
India
This corporatization is just old technique of looting state. This is how things work. First profit making state enterprise are corporatised in name of efficiency, than turn into PSU's. Than they are allowed to fail like BSNL & sold to pvt entities backed by politicians & there cronies who are themselves backed by global capital ( vested interest ) to loot country further. This lack of efficiency is just a myth by vested interest. neither russian nor Chinese allow vested interest to loot there state like India does....no matter how much corrupt the ruling dispensation is in there respective countries.