The 246-year-old history of the Ordnance Factory Board (OFB) will come to a halt on Friday when the 41 factories under it will be subsumed into seven Defence Public Sector Undertakings (DPSUs, wholly owned by the Government).

The seven new entities will be styled as Munitions India Ltd, Armoured Vehicles Nigam Ltd, Advanced Weapons and Equipment India Ltd, Troop Comforts Ltd, Yantra India Ltd., India Optel Ltd, and Gliders India Ltd.

The decision to dissolve and corporatise the OFB was taken by the Union Cabinet on June 16. The OFB functioned under the Department of Defence Production under the Defence Ministry. The corporatised entities will function under the Directorate of Ordnance (Coordination & Services).

According to the latest order of the Department of Defence Production issued on Friday, “...The Government of India has decided to transfer with effect from 1st October, 2021 (Appointed Date), the management, control, operations and maintenance of these 41 production units and identified non-production units to 7 Government companies (wholly owned by the Government of India).”

The seven companies incorporated under the Companies Act, 2013, wholly owned by the Government with limited liability by shares and will be known as DPSUs.

“Accordingly, on and with effect from the Appointed Date (October 1, 2021), OFB which has been set up vide Ministry of Defence letter no. 1(82/78/D (Fy.I) dated 09.01.1979 shall cease to exist as a body. Further, the Board position of Member (Finance) OFB shall also cease to exist on and with effect from the Appointed Date,” it said.

While the OFB was set up in 1979, the history of the Board dates back to 1775. 

During 1775, British authorities accepted the establishment of the Board of Ordnance in Fort William, Kolkata. This marks the official beginning of the Army Ordnance in India.

In 1787 a gun powder factory was established at Ishapore which started production from 1791 (at which location Rifle Factory was established in 1904). In 1801 a Gun Carriage Agency at Cossipore, Kolkata (presently known as Gun & Shell Factory, Cossipore) was established and production started from 18th March, 1802. This is the first Industrial establishment of Ordnance Factories which has continued its existence till date, according to OFB website. While the British set up 18 ordnance factories, the rest have come up post-Independence.

The Government has also decided to transfer all the employees of OFB (Group A, B and C) en masse to the New DPSUs initially for a period of two years in accordance with Rule 37A of the Central Civil Services (Pension) Rules 1972.

“The service conditions of the absorbed employees would not be inferior to the existing ones. A committee would be constituted by the DDP for guiding the new DPSUs in this regard so that the absorption package given is attractive,” it said. 

The Government has also decided that all the employees of OFB belonging to OFB Headquarters Kolkata, OFB New Delhi office, OF Schools and OF Hospitals will be transferred en masse to the Directorate under DDP.

Insiders in the OFB said the ordnance factories lost out to competition due to both unionism and stringent procurement rules for the acquisition of materials for production. The private sector on the other hand had a free hand in the procurement of materials for timely completion of orders.

Additionally, the modernisation of OFB production units was not apace with the times.

“There is a need to have a fine balance between the public and private sector for defense-related production given the sensitivities involved in manufacturing war stores,” an official said. 

Earlier, other defence PSUs like BEML, MIDHANI and Bharat Dynamics Ltd.  ended up being listed on the stock exchange and all the business secrets are out in the public domain through filings in the bourses, he added.