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All businesses are prone to change, the organisation can either zoom to new heights of success, or nosedive into decline or decay due to the changing environment. And the strategy at this point will matter.
Ordnance Factory Board, Kolkata (OFB) matters in the national landscape of defence preparedness. It is the key to a strong Military Industrial Complex and a Strategic Asset. At this hour of reckoning, there are doubts, anxiety, expectations and dreams involved.
OFB is set to change as announced by the Finance Minister Nirmala Sitharaman during the press conference on 16 May. The objectives outlined are to improve the operational efficiency and bring transparency in the OFB working. She said it is “corporatisation and not privatisation.”
Will the Elephant Dance Again to the Tune of the Market?
The question is, will the elephant with 82,000 employees dance again to the tune of the market?
The answer is both yes and no.
The most unfortunate part is that the media is full of such strategic prescriptions. The self-acclaimed experts talk the language of past, speak the words of rote. Therefore, they cannot make the OFB dance to the new tune of "Atmanirbhar Bharat". The narrative is without debate on alternatives. Many self-acclaimed experts merely parrot what they have learnt by their association with the defence sector.
It is said that ‘history repeats itself.’ The valiant soldiers led by the excellent military leaders delivered while the ‘elephant’ OFB backed them with desired guns, mortars, rockets, ammunition. This was when the nation failed to get them from overseas during the operations, which has been put on record by General VP Malik (Chief of Army Staff, 1997-2000).
And we celebrate the Armed Forces columnists who have been trained using such armaments during their service career.
The diatribes against OFB seem unconvincing to me. However, there is always scope for improvement of OFB's performance with regard to cost, quality and delivery, which is both consequential to their march for excellence, and true for any organisation.
A New Theory
A widely quoted report for reforms is Vice Admiral Raman Puri's attempt to reform OFB through six sigma technology. It put forth many recommendations including one that suggested restructuring through corporatisation, without employing references.
Six Sigma is a tool requiring heavy usage of statistics. It uses a method called “DMAIC”: Define, Measure, Analyze, Improve, and Control.
This General's recommendation of change in structure for implementation of tools is a new theory in making. It has no precedence.
Dismayingly, not many among the elite want to acknowledge that OFB makes the nation stronger. This is because, with the opening up of the defence economy, private interest has surpassed public interest.
Can OFB be Divided into Smaller Units?
Let's look at another suggestion:
In the year 2000, when the market was growing post Kargil War and there was no COVID-19 like situation to slow things down, the Nair Committee had recommended breaking the OFB into 15 Units.
Annually, Stockholm International Peace Research Institute’s (SIPRI) brings out a list of Top Defence Manufacturers. In the 2018 list, OFB did better than all other defence manufacturers in India, standing at serial number 37, with approximately a turnover of $2.65 billion. The figures of the top four rankers on that list, however, that year were:
- Lockheed Martin (No 1) with $44920 million
- Boeing (No 2) with $29930 million
- Raytheon (No 3) at $23870 million
- BAE Systems (No 4) at $22940 million
The contribution of the Indian Military Complex is very small in comparison to these giants, in the Global Sales of $398 billion by the Top 100 Companies. Size matters in international business. And some of the analysts now are recommending the break up of OFB. That doesn't, however, stand to reason. Besides, it is hard to discern the interests of such analysts, and their understanding of history.
The Defence market is different from the conventional market. The defence equipment industry thus represents a genuine domain of the state, a domain based on government orders on what to produce, what resources to use, what prices to charge, and even to whom to sell and to whom not to sell.
Even if some fragments of a market are present, they do not constitute an order. Thus, whether the market principles can be applied in totality is a big question.
Every country has to find its own solution in consonance with its culture, legacy and ambition. Copying others and imitating others will have serious consequences.
The dream of India as stated in Draft Defence Production is the target of achieving a turnover of US$ 26 billion in defence production and US$5 billion in defence exports by 2025. Contributions of the OFB and DPSUs are to the extent of 80%. Therefore, naturally, if these targets are to be achieved, it will be primarily driven by the Public Sector. This is despite the fact that many think tanks, policy makers etc now prefer other players.
What OFB Urgently Needs
The Indian Rail is a shining example of how the mix of department and a number of PSUs under it have come together to deliver optimally. Indian Rail has formed many PSUs like CONCOR, RITES, IRCTC with the specific objective to leverage their core competency by adhering to the business principles.
OFB urgently needs few PSUs under it such as a PSU for Logistics and Supply Chain Management, a PSU for Export and Marketing, a PSU for Township Estate Management so that the organisation may remain lean and may bring out the best from the corporate world. The General Managers can be freed from their routine responsibilities and the relationship between these PSUs and OFB will be that of client and service provider.
The Ministry of Defence has already made a novel experiment of making Indo-Russian Rifles Private Limited (IRRPL) at Korwa with 50.5 per cent government equity.
Once these PSUs are made and it has been published in an order that the OFB will get services from these PSUs, they can set the direction for reforms.
Under One Roof
China and UK have carried out reforms in manufacturing, by merging Design facilities with production units.
DRDO and OFB are two organisations operating sub optimally in India. Why not bring them together under one head? Not only will the turf war stop, but through synergy, they will set new performance benchmarks.
The need for bringing all capabilities under one roof is paramount, as the Defence Industry is multi disciplinary. Let the R&D, marking arms of all DPSUs, can come under one umbrella so that each leverages the competency of others.
Let all the units, which have been plagued by a rule bound Controller General of Defence Accounts (CGDA) make one amendment that through a citizen charter, timeline for each service will be rendered. Any referral not replied or concurred within 3 working days will have deemed approval.
Moreover, there needs to be a directive that one file cannot be returned multiple times for new queries. This will effectively curb the tendency of the accounting function to be more responsible. And the finance function needs to be taken over by the executive decision making arm of OFB for better professionalism.
Let OFB, Armed Forces, DRDO (Defence Research and Development Organisation) and DGQA (Directorate General of Quality Assurance) come together to form brand Product Managers. They can then look beyond the narrow confines of Project Management for an acquisition under DPP and plan holistically for introduction and phasing out of the equipment.
Let academicians and industrialists replace the current nominees of MOD with OFB so that they can truly bring more reforms than part time bureaucrats with limited expertise.
OFB may be allowed to shed the weight of the schools, colleges, and hospitals under it to become a lean organisation, so that it is free from social obligations. Let OFB become the epicentre of Collaborative manufacturing in the Defence Corridors through Public Private Partnership (PPP).
Empowered by the MOD, the elephant can then dance to the tune of innovation, to the new holding company structure, to the synergy of the merger of DRDO with OFB and following the removal of obstacles of the accounting system.
The Hon’ble finance minister must refrain from committing any historical blunders merely in order to save certain budgetary resources, especially when the nation is desperately looking for resources to manage its finances. Let the call of "Atmanirbharta" determine the reforms rather than the bigotry of players with vested interests in corporatisation.
Let my country awake to a stronger Military Industrial complex through an empowered OFB, freed from the fear of bureaucracy of MOD, DGQA and CGDA and to the unbounded knowledge of synergy of DRDO and OFB together.
(Dilip Vishwanath Gondnale is a former Senior Deputy Director General, Ordnance Factory Board, Kolkata. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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