Army Chief MM Naravane pays a visit to an OFB factory as part of the half-yearly review process

The profits recorded - ranging from Rs 1.3 crore to Rs 60 crore, may not be significant but reflect a remarkable improvement in performance over the last three years when they accumulated average six-monthly losses ranging from Rs 44 crore to Rs 677 crores.

nce companies that were formed after the corporatization of the Ordnance Factory Board (OFB) have reported profits in the first six months of their operations. This is an achievement for India's defence manufacturing sector, for these companies in the last three years have only reported losses, according to a statement from the Union government.

Except Yantra India Limited (YIL), all other six companies - Munitions India Limited (MIL); Armoured Vehicles Nigam Limited (AVANI); Advanced Weapons and Equipment India Limited (AWE India); Troop Comforts Limited (TCL); India Optel Limited (IOL) and Gliders India Limited (GIL) reported provisional profits during October 1 last year to March 31 this year. Even YIL, which was in the red, cut its losses by two thirds.

What Do The Numbers Say?

The profits recorded - ranging from Rs 1.3 crore to Rs 60 crore, may not be significant but reflect an improvement in performance over the last three years when they accumulated average six-monthly losses ranging from Rs 44 crore to Rs 677 crores.

Defence Minister Rajnath Singh took to Twitter to share his response on the performance of these firms saying, "These companies are scaling new heights and contributing to India’s defence manufacturing".

According to the data released by the Ministry of Defence on April 29, India Optel Limited made a profit of Rs 60.44 crore, while Munitions India Limited recorded Rs 28 crore in profit. Profit for Troop Comforts Limited stood at Rs 26 crore, while for Advanced Weapons and Equipment India Limited at Rs 4.84 crore.

The last two companies- Armoured Vehicles Nigam Limited and Gliders India Limited, recorded profits of Rs 33.09 and Rs 1.32 crore, respectively.

Yantra India Limited was the only company that reported a loss of Rs 111.49 crores compared to its previous average six-monthly loss of Rs 348.17 crores over three years.

How Did This Happen?

"Within a short time since their inception, these companies have been able to secure domestic contracts and export orders valuing more than Rs 3,000 crore and Rs 600 crore, respectively. MIL has bagged one of the biggest-ever export order of ammunition of Rs 500 crore. These companies are also taking measures for developing new products through in-house as well as collaborative efforts. YIL has bagged orders of about Rs 251 crore from Indian Railways for Axles", the defence ministry's statement read.

The new companies initiated various measures towards optimal utilisation of their resources and cost reduction, which led to them achieving a turnover of more than Rs 8,400 crore.

With focused attention on cost reduction, these companies have been able to make cumulative savings of 9.48 percent in areas such as overtime and non-production activities during the initial six months itself,” the defence ministry said.

The ministry also noted that the performance of the new companies is being monitored regularly by the Department for timely interventions if any, so that the objectives of the corporatisation of OFB are fully met.

Background

In July 2020, the Cabinet Committee on Security approved the corporatisation of the OFB, despite the organisation's protests.

Less than a year later, the cabinet cleared the restructuring of the OFB into seven separate corporate entities on the lines of the nine existing defence public sector undertakings in the country.

Under this plan, the 41 units functional under the OFB were subsumed under one or the other of the seven new companies.