The corporatisation reform of the Ordnance Factory Board (OFB), implemented in October 2021, has produced a major turnaround in India’s state-owned defence manufacturing ecosystem, according to figures released by the Ministry of Defence.

The reform initiative saw 41 OFB production units — which had functioned for nearly two centuries as a unified department under the government — being reorganised into seven independent defence public sector undertakings (DPSUs).

This reorganisation was aimed at injecting greater efficiency, accountability, and corporate-style governance into a sector long criticised for cost overruns, low productivity, limited competitiveness, and a lack of financial discipline. Nearly four years after implementation, the results have demonstrated the intended impact.

In financial year 2024-25 (FY25), the seven DPSUs collectively recorded a net profit of ₹1,625 crore. This stands in stark contrast to the financial state only a few years earlier, when the OFB as a whole reported a loss of ₹2,844 crore in 2019-20, underscoring the significance of the progress made.

The restructuring essentially replaced an archaic departmental structure with independent corporate entities, each responsible for its operations, profit and loss, and long-term strategic growth. This allowed the units to adopt professional management practices, pursue financial discipline, and respond to demand more dynamically.

The focus on corporatisation also provided these entities the flexibility to modernise production processes, invest in infrastructure, and seek export opportunities in line with the government’s wider "Aatmanirbhar Bharat" vision for indigenous defence production. The Raksha Mantri’s Office shared a growth chart highlighting this financial trajectory, stating that the reforms were delivering "remarkable results" and setting “new benchmarks in defence manufacturing.”

The turnaround is not simply limited to profitability but points to a broader structural shift in how India’s defence PSUs are expected to operate going forward. With corporate autonomy and accountability, the entities have been able to leverage opportunities in both domestic and global markets, develop partnerships with private industry as well as foreign manufacturers, and accelerate delivery timelines for the armed forces.

The DPSUs have also gained strategic clarity by specialising in specific sectors of defence production — from ammunition and ordnance to armoured vehicles, troop equipment, and advanced systems — thereby eliminating bureaucracy-driven inefficiencies that had earlier hampered productivity.

Furthermore, the reform reinforces the government’s long-term goals of boosting self-reliance in defence manufacturing and reducing import dependency. A net profit of over ₹1,600 crore in FY25 — after decades of inefficiency and financial instability under the old OFB structure — illustrates the potential of India’s state-owned defence manufacturing base when aligned with modern management models.

The success of this corporatisation is now being projected as a benchmark reform that could shape future policy moves in India’s broader military-industrial ecosystem, encouraging further collaboration between the public and private sectors while enhancing India’s profile as a global defence exporter.

Based On A PTI Report