A OFB manufactured AK-103 assault rifle clone

BANGALORE: Staring at a lagging production schedule and a month-long strike called by ordnance factories’ workers, Saurabh Kumar, chairman, Ordnance Factory Board (OFB), has raised concerns about the survival of the 41 factories if they were to be corporatised in a letter to the ministry of defence. 

In this letter, accessed exclusively by TOI, Kumar makes a point-wise analysis made by OF Board members—from economics of maintaining a war reserve to reasons as to why corporatising may not double its turnover—and points out to various demands the workers have. 

Late on Friday, the department of defence production (DDP), under MoD, agreed for a meeting with the workers. A notice about the same has been issued, and a meeting is scheduled for August 14. The meeting will be chaired by additional secretary (defence production), and two representatives each from all the three employee unions have been invited for the meeting. 

Key War Reserve

Claiming that ordnance factories have the capacity to significantly enhance production during war time, Kumar’s letter reads: “OFB could ramp up production of ammunition items by 50% to 300% (as per requirement) and meet urgent operational requirements of the army. This has been possible only because of the war reserve capacity being maintained.” 

Further, arguing that such exigency of requirement can’t be ruled out in the future, he adds: “...Hence such capacities would be required without any commercial considerations and return on investment irrespective of the structure of OFB. As per accounting procedure of OFB, adequate provisions for maintaining such war reserve insurance exist.” 

Doubling Turnover

Explaining the situation of orders with the OFB and its turnover thereof, the letter points out that how the army, which is the principal and only large customer of the OFB, may not be in a position to place orders that are valued more than Rs 10,000 crore to Rs 11,000 crore. He argues that in such a situation, the OFB cannot double its turnover even with corporatisation. 

“Even if 20% of the planned Rs 30,000 crore (once doubled) turnover comes from exports, the demand for balance Rs 24,000 crore would essentially come from the armed forces and paramilitary forces. Since most of the production lines are specific to production of military items, diversification to non-military products may take time,” the letter reads. 

“...As per the recent projections given by the army, they are likely to place an order for Rs 10,000 crore to Rs 11,000 crore per annum, and an additional Rs 3,500 crore can be expected from the navy, air force and MHA. Thus, as against the target of Rs 24,000 crore, only Rs 14,000 crore is visible. After 26/11 (Mumbai attacks), army places demand for various ammunition items in large numbers. This has helped army build adequate stocks. Since, the efficient stocks are now available, future demands of army have been substantially reduced,” the letter adds. 

Hopeful of Resolution

The OFB letter comes after the unions met its Chairman on August 6, and he then consulted with the members of the board. TOI has learnt that Kumar had also met with Ajay Kumar, secretary-defence production, DDP, on Friday. 

While Ajay did not respond to TOI, he told reporters on the sidelines of an event in Kolkata that the department was hopeful of a resolution. The meeting notice, a copy of which is with TOI, makes no reference to the 30-day strike called by workers, the OFB letter suggests that this strike is only the first phase and that it could get extended if they are not negotiated with.