Seven New Defence PSUs Created After Dissolution Of Ordnance Factory Board To Be Launched This Week

Prime Minister Narendra Modi will launch the seven new public sector undertakings (PSUs), created after the dissolution of the Ordnance Factory Board (OFB), later this week.

The 41 units which were functional under the OFB will be subsumed under one or the other of the seven new companies.

The seven new PSUs created under the Defence Ministry for this purpose are Munition India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited and Gliders India Limited.

To provide funding for the operations of these new PSUs, the government has decided to convert all the intents placed with these factories into deemed contracts. Around 60 per cent of the annual price of the intents will be paid by the services, including the Indian Army and state police services, to the new DPSUs as mobilisation advance.

"Total number of such contracts numbering 66 have a cumulative value of more than Rs 65,000 crore," the Economic Times quoted an official as saying.

Avani Armoured Vehicles, with running contracts from the Indian Army for Arjun Mark-1A main battle tanks, will get the largest chunk at around Rs 30,025 crore, followed by Advanced Weapons and Equipment India Limited, which will get orders worth Rs 4,066 crore.

According to reports, Prime Minister Modi is likely to launch the new entities on Friday this week (15 October).

The dissolution of the OFB was the first step towards the corporatisation of its units to improve efficiency and quality and ensuring accountability.

Corporatisation of OFB will give the organisation a structure similar to that in the existing DPSUs, which are managed by their own board of directors with the government giving only broad guidelines, thereby providing greater autonomy and flexibility at managerial and functional levels.

New entities will be able to make their own plans on investments and research and development, without much interference from outside.

Post corporatisation, the new entities will also be able to forge partnerships with defence manufacturers in the private sector, both domestic and foreign, like other DPSUs such as Hindustan Aeronautics Limited have done.

This would bring new hardware and technology to these units, helping them upgrade the existing infrastructure, which is outdated in many cases.

The new entities will also be in a better position to improve capacity utilisation, face competition and tap new export opportunities. Post-corporatisation, the new units will move from administrative pricing mechanism to competitive pricing, which in turn will bring down the cost of products for the armed forces.

These entities will also be able to retain profit, making them self-sufficient financially in the medium term.

The government believes corporatisation of OFB could increase the turnover of the ordnance factories to Rs 30,000 crore by 2024-25, help grow exports to 25 per cent of the turnover and increase self-reliance in technology, which is currently limited to 20-25 per cent, to over 75 per cent by 2028-29.