Ordnance Factories’ Corporatisation Failed? Asks C. Srikumar, General Secretary, AIDEF

OPINION PIECE

The arrest of a senior Munitions India Limited (MIL) executive in an alleged bribery case and fresh questions over procurement decisions at Bharat Dynamics Limited (BDL) have intensified the debate over the corporatisation of India’s former Ordnance Factory Board.

C Srikumar, General Secretary of the All India Defence Employees Federation (AIDEF), has demanded that the government roll back the 2021 corporatisation and bring the seven Defence Public Sector Undertakings (DPSUs) created from the erstwhile Ordnance Factory Board back under the government setup.

In an interaction with indianpsu.com, Srikumar argued that the developments involving defence PSUs raise serious questions about the government’s claim that corporatisation would improve accountability, operational efficiency and professional management.

“Increasing corruption and CBI raids in the Ordnance Factories are proof that corporatisation is a failure,” Srikumar maintained, calling for a comprehensive review of the functioning, management decisions and procurement practices of the seven DPSUs.

His remarks come amid a CBI investigation into alleged bribery linked to a defence contract involving MIL and private defence manufacturer SMPP Limited, as well as questions surrounding a ₹56.8-crore procurement proposal at BDL involving a company associated with its former chairman and managing director.

59,033 Employees Reject Absorption into DPSUs, Says AIDEF

Srikumar said the government had maintained that corporatisation would make the former Ordnance Factories more accountable, efficient and innovation-driven. However, he alleged that the experience of the past five years had exposed serious shortcomings in management practices, institutional oversight and employee consultation.

The government is preparing to mark five years of corporatisation in December 2026, with an emphasis on higher production and exports. AIDEF, however, maintains that improvements in output cannot, by themselves, establish that the restructuring has achieved its broader objectives.

A key argument advanced by the federation concerns the government’s deadline of October 15, 2026, for defence civilian employees to exercise their options regarding government service or absorption into the seven DPSUs.
According to the figures provided by Srikumar, 59,033 out of 59,318 employees opted to remain in government service, while 123 opted for absorption into the DPSUs. He said the overwhelming preference for government employment demonstrated the workforce’s opposition to corporatisation.

The figures supplied by AIDEF require reconciliation: the stated numbers of employees opting for absorption and those not submitting their options do not account for the full difference between the total workforce and those choosing government service.
Srikumar also credited AIDEF’s legal battle before the Madras High Court with helping protect the service conditions of defence civilian employees as Central Government employees.

MIL Bribery Case Raises Questions Over Defence Procurement

The arrest of Anil Kumar, Executive Director (Operations) of MIL, has emerged as a major development in the controversy surrounding the new defence PSUs.

The CBI has arrested Kumar in connection with an alleged bribery case linked to a defence contract worth approximately ₹500 crore involving SMPP Limited. The agency has reported the seizure of more than ₹2.2 crore in cash during searches and is examining the official’s dealings and other contracts handled by him.

The case has brought renewed attention to the risks associated with procurement decisions, access to sensitive information and relationships between public-sector officials and private defence suppliers.
Srikumar argued that action against individual officials, although necessary, would not be sufficient if systemic weaknesses in governance and oversight remained unaddressed.

BDL Procurement Controversy Adds to Scrutiny

BDL has also come under scrutiny over a proposed procurement of 300 optical sights used in anti-tank guided missile systems.
The procurement involves Aindri Defence Advisory Private Limited, a company established by former BDL CMD Siddharth Mishra and his wife, Shambhavi Mishra. The company has quoted ₹56.8 crore under a single-tender process, with the financial assessment reported to be ongoing.

The controversy raises questions about procurement transparency, conflict-of-interest safeguards and the need for robust checks when former senior executives have links to companies seeking business from their erstwhile organisations.
The tender’s reported status is important: the ₹56.8-crore figure relates to the quoted value, and the available reports do not establish that the order has been finally awarded.

For Srikumar, such developments reinforce the need to examine how senior management appointments, procurement decisions and dealings with private suppliers are scrutinised across the defence production ecosystem.

AIDEF Alleges Arbitrary Management and Weakening Oversight

Srikumar alleged that corporatisation had increased managerial arbitrariness and weakened institutional consultation.
He questioned the processes used for appointments and postings in the new DPSUs, alleging that some senior positions were filled through discretionary choices rather than transparent, consistently applied policies.

He also raised concerns over large-scale outsourcing, diversion of indents to private firms at allegedly exorbitant rates, procurement of substandard materials and violations of General Financial Rules (GFR).

These are allegations advanced by the federation and would require examination against the relevant procurement records, audit findings and official responses.

According to Srikumar, trade unions previously had established channels to bring alleged irregularities before the Ordnance Factory Board and the Department of Defence Production. He contended that the consultative mechanism that existed under the old structure had weakened following corporatisation.

He further alleged that representations against questionable management decisions were no longer receiving adequate attention.
“Most unfortunate is that the powers given to management are being misused,” was the thrust of his criticism. He argued that some senior officials appeared to treat public-sector organisations as personal domains rather than public institutions accountable to the government and the taxpayer.

Post-Retirement Employment and Private-Sector Links Under Question

Srikumar also called for stronger safeguards against potential conflicts of interest involving serving and retired executives of defence PSUs.

He alleged that some senior officials had established private businesses in the names of family members and subsequently entered into commercial dealings with their public-sector organisations. He also raised concerns about former executives joining private companies as consultants or advisers and potentially using their previous positions and connections to secure business.
The federation wants the government to strengthen rules governing conflicts of interest, related-party transactions and post-retirement employment, including a review of cooling-off periods.

Such safeguards are particularly important in defence production, where procurement can involve sensitive technical information, strategic materials and substantial public expenditure.

The allegations do not establish wrongdoing by any particular individual or company. However, they underline the importance of effective disclosure requirements, independent scrutiny and enforceable conflict-of-interest rules.

Corporatisation Versus Government Control: The Central Question

The government’s case for corporatisation was built around the creation of professionally managed, empowered and commercially responsive enterprises. The restructuring of the Ordnance Factory Board into seven DPSUs was intended to improve efficiency, accountability and the ability to respond to the requirements of the armed forces.

AIDEF’s argument is that the corporate structure has not delivered the governance improvements promised by the government.
Srikumar said the weakening of employee consultation, arbitrary management decisions and concerns over procurement practices have eroded confidence in the new arrangements. He maintained that the performance of these enterprises must be assessed not only through production and export figures but also through transparency, financial discipline, institutional accountability and employee confidence. The controversy also raises a broader policy question: whether corporatisation, by itself, can improve governance without strong independent oversight, transparent decision-making and effective mechanisms for addressing employee grievances.

The MIL case, meanwhile, demonstrates why allegations involving sensitive defence contracts demand a thorough investigation. The BDL procurement controversy similarly underscores the importance of transparent procedures and safeguards against potential conflicts of interest.

Neither case, on its own, establishes that corporatisation has failed across all seven DPSUs. But together with the wider concerns raised by AIDEF, they make a substantive review of procurement controls, management accountability and institutional oversight a legitimate policy issue.

AIDEF Calls for Rollback

Srikumar’s demand goes beyond disciplinary action against individual officials. He wants the government to reassess the entire corporatisation exercise and restore the Ordnance Factories to the government establishment. He argues that the government should not declare the restructuring a success merely on the basis of higher production or exports while concerns over management practices and accountability remain unresolved.

Concluding his argument, Srikumar invoked the observation of former Defence Secretary N. N. Vohra, who, according to him, had described the federations representing defence civilian employees as the “eyes and ears” of the Defence Ministry because of their understanding of ground realities.

The message from AIDEF is clear: the government must take employee concerns seriously, investigate allegations of corruption, strengthen procurement oversight and examine the consequences of the restructuring before celebrating its five-year milestone.
The immediate challenge for the government is to establish whether the new DPSU structure is delivering not merely higher output, but also the transparency, accountability and institutional confidence that corporatisation was intended to achieve. For AIDEF, the answer lies in rolling back corporatisation and restoring the Ordnance Factories to government control.

Views expressed here are those of C. Srikumar, veteran Trade Union Leader who is also the General Secretary of All India Defence Employees Federation