Corporatization of OFB – The unknown angle
By Lt Gen PR Shankar
Corporatization of Ordnance Factory Board(OFB) and ‘not privatization’ repeat ‘not privatization’ was announced with emphasis by the Finance Minister as one of the big bang reforms being undertaken in the Defence Sector as part of the Atma Nirbharta campaign. I welcome it wholeheartedly.
It is more than time for this reform to happen. However, in the past few days, social media is flooded with views and suggested Standard Operating Procedures (SOP) for the corporatization 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.
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. The result, loss of lives, limbs, morale and weapon systems destroyed. Immediate cost - life long compensation to victims. Recruitment and training cost of individuals to replace casualties.
The 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 the defence 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.
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 per cent. For the same period, the OFB inflation rates were about 100 per cent!
During my presentation to the Defence Acquisition Council (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.
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 the 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.
OFB has a low threshold of 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 transfer of technology (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 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 ensure 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 downward slope for a variety of reasons. Their differences of opinion and egos have 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 the 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 have 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.
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 Defence Public Sector Undertaking. 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.
I was once discussing the offset options in a case with a foreign OEM. He had chosen OFB as an offset partner. Did I ask 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 per cent, Atma Nirbhar Bharat will be 100 per cent. 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. Vice 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 a 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 sop 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.
Author is an Indian army veteran. Views expressed here are personal.