OFB – Corporatisation – Secretary(DP) asks Federations to give alternative viable and concrete proposal to continue OFB as a Government Department

After the settlement reached between AIDEF, INDWF and BPMS, the All India Federations of the 41 Ordnance Factories and the Ministry of Defence in the conciliation proceedings held under the Chairmanship of CLC(C) on 09/10/2020, the Secretary(DP), Department of Defence Production convened a meeting with the 3 Federations on 29/10/2020 to discuss their strike demands. The Federations submitted a joint note on all these 3 demands and insisted that at the outside they should get a point wise reply from the MoD and then on the basis of the reply discussions can take place in future. In the 3 hours discussions held today with Secretary(DP), all the three Federations insisted that requested the Federations to come with a concrete and viable proposal other than Corporatisation,  that how the Ordnance Factories can further function effectively  as a Defence Production Units for the satisfaction of its customers. The Federations agreed that they will discuss amongst themselves and submit an alternative and viable proposal for the consideration of the Government, so that OFB continue to remain as a Government Department.

The Federations have challenged that, since the OFB Corporatisation decision, if implemented will be a disaster for the National Security and whether the consultants appointed for for Corporatisation and beurocrats who are involved in the decision making process at present at the Defence Ministry  will take the responsibility for the disaster. The content of the Joint letter submitted by the Federations to the Secretary (DP) is reproduced here by www.indianpsu.com for its readers –

Considered views of the Federations on the 3 Strike demands for which settlement was reached in the Conciliation proceedings held on 9-10-2020 under the Chairmanship of CLC(C) – meeting with Secretary(DP) on 29/10/2020.


It is unfortunate that the Government in the name of providing simplistic solutions for making the OFB more accountable and efficient have decided to Corporatise the OFB without the understanding that this decision is going to create more problems than they resolve. The decision of the Government is going to have very serious implications on the National Security and Defence preparedness of the Country. The so called simplistic and imprudent solution will only cater to destabilize the time tested Defence Production System of our country. With the fervent hope we are submitting this document that you will deal the entire issue with a human face and healing touch, so that the ill conceived decision of the Government can be reconsidered and withdrawn.
The 80,000 strong workforce of 41 Ordnance Factories and its Headquarters formation are in a battle defending the 219 years old Indian Ordnance Factories from liquidation / closure / sale. We feel it is our dharma to defend the Ordnance Factories from the ill conceived plan of MoD for Corporatizing the same. We feel it is our prime duty to protect National Security and support the Armed forces and that is why we oppose the Corporatization of OFB which is neither in the National interest nor in the interest of the Employees. From 17-5-2020 to till date we have submitted more than 20 representations opposing the Government decision to Corporatize the Ordnance Factories bringing out the dangerous consequence of the same. We are not aware, whether anybody in the MoD / DDP has gone through our representations or it has gone to the dustbin of the DDP. Notwithstanding the same, since Secretary (DP) has convened this first meeting on 29-10-2020, after the settlement reached on 9-10-2020 in the presence of CLC under the provisions of ID Act 1947, we take this opportunity to bring the whole gamut issues to your notice in a brief manner, that why we oppose Corporatization of OFB, why we are suggesting to appoint an expert committee with the aim of achieving Rs.30,000 Crore production target within 5 years in the Government setup itself and why the employees do not want to lose their status as a Central Government Employee / Defence Civilian Employee paid from Defence services estimates etc.

Strained relations between the employer and the employees :

It is unfortunate that the DDP has violated all its past assurances and Agreements resulting in such a stage that the Ordnance Factory Employees have lost their confidence and trust with DDP, since the DDP has arbitrarily used state power to overthrow all the written assurances given by the previous Defence Ministers to the Federations the effect that OFB would not be Corporatized. The employees now feel that they are not in the hands of a trusted employer, since the employer i.e., the DDP is treating them as their worst enemy without any reason and cause and are weaving a conspiracy to finish their temple of work and service life. However, as responsible and constructive Trade Unions of the Defence Civilian Employees, we would like to draw your attention on the following issues in the proposed meeting to be held under the Chairmanship of Secretary (DP) on 29-10-2020 as an outcome of the settlement reached in the conciliation proceedings held on 9-10-2020.

Honour the settlement reached on 21-8-2019 and 9-10-2020 in the conciliation proceedings:

The DDP instead of viewing the settlement through lens to find out loop holes in it and misinterpreting the ID Act 1947 by mutilating the sentences to suit its needs and ends may be stopped immediately to continue the trust/mutual respects generated during the conciliation meeting. The DDP has conveniently picked up a portion of the ID Act that deals with the service condition and conveniently ignored the provisions contained therein that they shall not act prejudicial to the workmen. The consultant appointed by the DDP has been asked to function and to visit various Ordnance Factories is in stark violation of the conciliation process and the settlement contained in the CLC proceedings as the content of the ID Act is absolutely prejudicial to the workmen and in fact is the crux of workmen’s bone of contention. The act of DDP in this regard is mischievous and in brazen violation of the settlement reached in the CLC meeting on 21-8-2019 and on 9-10-2020. We only request the Secretary (DP) to desist from such action and initiate the dialogue with the Federations with an open mind without any conspiracy or hidden agenda. Such mistrust would only distance the parties further and avoidable bad blood.

Violation of the previous assurances and Agreements by the DDP :

The following assurances and Agreements are violated by the DDP by the authority of state power.

Assurance given by the RM (late. Jaswant Singh) on 18-7-2001 :

“ He asserted that the first choice for productionising any equipment, was always Ordnance Factories and Defence Public Sector Undertakings. RM also mentioned that there was no proposal for Corporatization of Ordnance Factories presently under consideration of Government. He emphasized that Ordnance Factories function under the control of the Ministry of Defence and shall continue to do so.”
(Ref: Minutes of the meeting taken by the RM on 18-7-2001 circulated vide MoD ID No. 11(1)/2001/D(JCM)/Vol.II, dated 20-7-2001.)

Assurance given by the Defence Secretary on 19-4-2002 :

Defence Secretary stated “ Regarding Government’s policy on private participation in Defence production, Corporatization of the Ordnance Factories, downsizing of the Government machinery, Defence Secretary clarified that the reports o f the Nair Committee on corporatization and Jafa Committee on reorganisation of DGQA and MES had been received. The recommendations contained therein were to be studied and before any decision was taken, the issues would be discussed with the Staff Side”
(Ref : Minutes of the meeting circulated by MoD ID NO. 11(11) 2002/D(JCM), dated 19-4-2002.)

Assurance given by the RM (late. George Fernandez) on 22-4-2002 :

RM Stated that “ There was no proposal for privatisation / corporatisation of the Ordnance Factories or any other defence establishment at present. In fact, the Government would encourage growth of Ordnance Factories. The recommendations contained in the Nair Committee and Jafa Committee were not presently under consideration of the Government. As and when these were taken up for consideration, the Staff Side would suitably be consulted.”
(Ref : Minutes of the meeting circulated by MoD ID NO. 11(11) 2002/D(JCM), dated 22-4-2002.)

Assurance given by the RM (late. Pranab Mukherjee) on 18-9-2006 :

RM Stated that “ That Government does not intend to dilute the role of Ordnance Factories and DPSU’s in Defence production. A number of steps have been taken to strengthen and improve their functioning and such efforts will continue in future also. He informed that Government and the Armed Forces are reasonably satisfied with the performance of Ordnance Factories.”
(Ref : Minutes of the meeting circulated by MoD ID NO. 9(2) 2006/Kel Com / Report DP (plg-III) dated 13-10-2006.)

Assurance given by the RM (Shri. A.K. Antony) on 26-6-2007 :

“ RM further observed that as the Federations were opposed to Corporatisation of OFs, his predecessor had categorically assured them that there was no intention to implement the recommendation of the  Kelkar Committee relating to Corporatisation or Ordnance Factories. He said that the present policy is the same”
(Ref : Minutes of the meeting circulated by MoD/DDP letter No. 7(14)/2007/D(S-III) dated 11-7-2007.)

Assurance given by the RM (late. Manohar Parrikar) vide letter dated 15-4-2015. 

‘That at present there is no proposal to Corporatise the Ordnance Factories”

Assurance given by the RM in the Parliament on  3-3-2015:

“In reply to an unstarred question no. 833, raised by MP. Shri. Tapan Kumar Sen, the then Hon’ble RM on 3-3-2015 informed RajyaSabha that there is no proposal to corporatize the OFB and also informed that such an assurance was given to the Federation in the past”.

Assurance given by the Secretary (DP) to the Federations in the Strike Settlement on 23-8-2019: “It was further informed that no decision has been taken by the Government on the corporatisation of OFB”.

Statement made by the DDP before the Parliamentary Standing Committee on Defence 14th  Lok Sabha (2005-06).

“Ordnance  Factories  function  as  a  Government  Department  and  are  accordingly  governed  by the  applicable  rules  and  regulations.  As  an  established  National  Policy,  Ordnance  Factories  are  also  required  to aintain  idle  capacities  to  take  care  of  surge  demand  in  emergent  war  situation.  In  a purely  commercial  term,  maintaining  idle  capacity  would  be detrimental  to  the  business  interest  of  the company (PSU) and  would  appear  to be a  reason  for  low  performance  in  terms  of  turnover  and  profits.  In  turn,  it  would  also  place  such  DPSU’s  in  disadvantageous  position  in  a  competitive  environment.

Extract from the 8th Report of the Standing Committee on Defence, 17th Lok Sabha, 2019-20 is given below for your kind ready reference.
1.2  to summarises the role of Ordnance Factory Board include to provide a dedicated manufacturing base for Military hardware, indigenisation and Transfer of Technology (ToT) absorption, maintenance of ‘War Reserve’ capacity and ‘life Cycle’ support to arms and ammunition supplied etc.

Stop and prevent mudslinging against OFB by retired senior Army Officers:

After the announcement of the Government on 16-5-2020 to Corporatize the Ordnance Factories, there are lot many Articles published by vested interest and politically motivated Retired Army Officers who are in the pay roll of private sectors. After having taken out their uniforms, they are posting misplaced interpretation, factual ignorance of private interest on Media etc., in fact many confidential information of the Army and DDP is being leaked out and the same are published in these Articles. We have already demanded a CBI enquiry on this. The MoD is capable of taking action against these vested interested Retired Officers. However the silence of the MoD / DDP inspite of our complaint and representation is baffling to us. Since MoD is the custodian of the Ordnance Factories, instead of remaining as a silent spectator should come forward to take appropriate legal action against these Retired Army Officers and proself claimed Defence Experts.

Note on Strike Demand No. 1 :

Why the employees and Federations oppose Corporatization of Ordnance Factories :

1) The Nair Committee, Kelkar Committee, Raman Puri Committee etc., which the DDP is referring for corporatization of Ordnance Factories, these reports are not exclusively for any transformation or re engineering of OFB, but the issue of Corporatization was addressed by these committees from sideline. The recommendations of all these previous committees appointed for restructuring of OFB including the Corporatization of OFB was rejected by the very same DDP / MoD on valid grounds and rationale. The only committee which submitted an exclusive report on OFB was the Rajadhyshkya Committee based on which the current board structure was formed in 1979. The recommendations of this committee with regard to integration of Finance, Accounts and Internal Audit with OFB, full authority and responsibility for quality assurance and inspection of its products with OFB are not yet implemented. The Government should have implemented all these recommendations. Not implementing these valid recommendation and Government’s keenness to implement the Nair Committee, Kelkar Committee and Ramanpuri Committee etc., which deviated from its agenda and made the recommendations of Corporatization without any basis is not acceptable to us.

2) Targeting Corporatization as the only option, unfortunately gives a disturbed and wrong signal.

3) The principles adopted during capacity creation in each one of the Ordnance Factories is that it does not let itself to commercialisation due to the violent fluctuation of load between peace time and in times of war. OFB is built as a strategic entity with flexibility to ramp up capacity during surge requirement. This is impossible in a commercial corporate setup resulting in closure of the Factories which is a clear violation of the written assurance given by the MoD that none of the Ordnance Factories would be closed. (Ref. Minutes of the meeting held on 9-3-2018 circulated vide MoD Note No. 17(6)/2017-D(JCM) dated 12-3-2018).

4) OFB are the forth force of the Defence of our Country and to be treated as “War Reserve” at par with the Armed Forces to maintain idle capacities to take care of surge demand in emergent war situation. This “War Reserve” only came to the country’s rescue during Kargil crisis. Similarly, when the Country was facing the Covid-19 pandemic spread the employees of Ordnance Factories worked day and night to produce all types PPEs, Sanitizers etc. required for the Doctors, Nurses, Para Medical Staff and Health Workers. Thus, Ordnance Factories are equally Peace reserve also.

5) In a purely commercial term, maintaining idle capacity would be detrimental to the business interest of the Corporation/ PSU. Therefore, Ordnance Factories should continue as a Departmental Organization from the security and safety point of the country.

6) Converting the Ordnance Factories into a PSU/Corporation is not a commercially viable option due to :
(a) Fluctuations in orders.
(b) Orders after Long Gap.
(c) Uneconomical Order Quantity.
(d) Life Cycle support required for 30-40 years after introduction of equipment.

7) Risk to national security in case of growth of private players in the event of possible failure of the proposed OFB Corporation resulting in disinvestment, closure etc. especially when the Government have announced that there will be only 4 PSU’s in the strategic sector and the rest will be privatised (there are already 9 PSUs under DDP).

8) The so called private vendors are not able to supply even raw materials, spares and components in time to the Ordnance Factories, which affects the timely manufacturing of the allotted workload. Therefore, their ability to supply to the Armed forces after the Ordnance Factories Corporation becomes sick due to withdrawal of placement of indent through nomination system will be a big question mark.

9) The experience of BSNL, even though it is a revenue earning service PSU which is struggling even to disburse the monthly salaries and pension to their own employees, about 90,000 employees of BSNL  already shunted out in the name of forced VRS gives a clear picture about the future of OFB Corporation. In this background what will be the fate of the Ordnance Factories which totally depends on the orders from the Armed Forces and the Government. The present crisis being faced by DPSU, HAL is another living example.

10) Market principles cannot be applied in the case of Ordnance Factories since the Defence Industry represents a genuine domain based on Government Orders as to what to produce, what resource to use, what price to charge and even to whom to sell and to whom not to sell.

11) Interference and expectations from Political / Bureaucracy would increase.

12) The experience for the past two decades is that corporatization / PSU is a route to privatization against the service conditions of the employees who are basically recruited as Central Government Employees / Defence Civilian Employees through All India Competitive / Selection process etc.

13) More than 44 thousand employees are in the age group of 25 to 50 years with lot of Family, social and financial commitments . Their future will become uncertain and will be completely ruined.

14) The future existence of many Ordnance Factories including the 5 OEF Group of Factories manufacturing Troop Comfort Items will be in stake, since the Government has already declared more than 275 products of OFB as Non Core and has started outsourcing the same without studying about its pros and cons.

15) The Government decision will only increase the import content of India  as OFB will become unviable and redundant as a result of Corporatization.

16) Corporatisation will make OFB unsustainable, make it a right candidate for sale. The Private sector will acquire the stressed assets at a throw away price. The self Reliance objective will remain unanswered. Government already fixed 16th November 2020 as last date for sale of BEML, SCI, BPCL with throw away price.

17) The OFB in a Special Board Meeting held on 31.08.2020 have threadbare analysed the various implications of the Government decision of Corporatization and have recorded their considered views and forwarded to the Government, it clearly brings out that Corporatization decision will be a serious threat and challenge for the survival and existence of Ordnance Factories.

In view of the above we are of the firm view that the consequences of Corporatization of OFB will be disastrous and will have serious consequences on the National Security of our Country. In such a situation whether the consultants appointed by the DDP or the bureaucrats making decisions will take full responsibility and accountability of its consequences. This question needs to be answered before the people of this country. It is pertinent to mention here that complaints are already filed with CVC against the appointment of Consultants and the Federations have also lodged a complaint to the President of India.

Note on Strike demand 2 : 

In a meeting held with the Addl. Secretary (DP) on 14-8-2019 the Federations have given many proposals with regard to the alternative mechanism for transformation of OFB to achieve Rs. 30,000 Crores within 5 years in the current Government setup itself. We are reiterating the same here.

1) The Government is always insisting that OFB should achieve a target of Rs.30,000 Crores within a period of 5 years. We have accepted the challenge and have informed the Government that the workforce will extend all support  and co operation to achieve this target level provided Government extends all support in providing full workload to all the factories, separate allotment of salary budget, five years roll on indent to all the factories including those items declared as Non Core from Armed Forces especially the Army.

2) The assurance given by the Secretary (DP) in the meeting held with the Federations and CDRA on 17-12-2018, 11-1-2019 and subsequent meeting of the National Council JCM that steps are being taken to implement the proposal of the Staff side for separate allotment of Salary expenditure and to delink the same and various overheads from the cost of the products is under active consideration of the Government and a decision would be taken soon. This commitment may be implemented without further delay.

3) Please refer to the latest order of Department of Telecommunication for mandatory utilisation of network of BSNL and MTNL for internet / broadband, landline/leased line by all Ministries/Departments of Government of India / CPSU’s and autonomous bodies etc., under Central Government. The DDP should learn a lesson from the experiment the Government did for making BSNL fail and now it is betting up to set some things right, very well knowing the departure of BSNL will bring monopoly and customers will be charged high. Therefore please issue orders for withdrawal of Non Core items to make OFB viable. Let nominated orders flow to OFB to fully utilize the capacity.

4) Whatever reforms the DDP wanted to implement, the same is possible within the Department setup itself. Only problem what we understand is DDP’s reluctant to delegate, not to permit OFB to work freely. Since the GM postings are decided by the MoD, it is natural the GM’s are accountable to MoD than to OFB first . Then why MoD is not taking responsibility for accepting failures.

5) No organisation can boast that they are not amenable to improvement. So is Ordnance Factories. The best way of going forward is to appoint an expert committee which can be empowered to suggest improvements in the existing structure and allowed to implement the same in consultation with the Federations.

6) Corporatization cannot be a pre condition for autonomy, accountability and efficiency. Conversion of OFB into a PSU without considering the concomitant risks associated with it would bring untold miseries and unmitigated risks to the Armed Forces resulting in serious impact on the security of our country. A situation should not come to the country because of the decision of corporatisation of OFB, that MoD need to beg  private parties for supplies in light of past experience with private suppliers.

7) Federations are prepared to co operate to ensure that OFB emerged as a world class manufacturing unit, a leader of technology, constantly strives for innovation so that OFB can emerge as a solution provider, system integrator which ensures technological advantage and thus that of its customers.

Note on Strike demand NO.3:

Concerns of the employees on change of service matters.

1)There are innumerable number of Supreme Court Judgements that employees have a legitimate expectation that they would continue to serve the Government till they attain the age of superannuation. Their legitimate expectations will be stifled in an arbitrary, unjust and unfair manner if corporatisation happens. It is further contended that the procedure adopted for corporatisation of 41 units is not in accordance with law and while taking decision of Corporatisation, welfare and service condition of the employees have not been taken care and service condition of the employees is likely to be altered to their detriment.

2) Transfer of employees on deputation to a corporation without their consent is legally not permissible. The proposed action of the DDP is a clear violation of the provisions of Article 14 and 16 of the Constitution of India.

3) In H.L. Trehan and others v. Union of India and others, (1989( 1 SCC 714, it has been held by the Supreme Court that there can be no deprivation or curtailment of any existing right, advantage or benefit enjoyed by government servant without complying the rules of natural justice, Similar view has been expressed in B.C.P.P Mazdoor Sangh v. NTPC, AIR 2008 SC 336.

4) From a HR angle, the employees are in panic, counting their days before they are thrown to the dwindling boat of Corporatisation with their right of drawing salary from consolidated fund of India being taken away, violating the fundamental rules of service conditions. As long as their drawing of salary and pensioners are protected from consolidated fund of India, they will be keener to contribute to the Self Reliance of the Nation in the current set up of OFB.

5) After considering the fiasco of BSNL experiment, there will be a situation where all 80,000 employees will be forced to decide to remain in Government of India, resulting in OFB corporation searching for talent in the market which they will be finding difficult to find and will affect the capability of corporation to deliver.

6) All the benefits of Central Government Employees from time to time about pay, allowances, advances, all welfare benefits, career advancements through cadre restructure, MACP, revision of pay scales and other benefits through pay commission, medical benefits while in service and after retirement, Reservation on recruitment and promotions, Recruitment of Ex-Trade Apprentices, Compassionate Appointment, LTC, various leave facilities, Holidays, GPF, Children Education Allowance, Piece work system / incentive, PLB, Factory Hospitals, residential colonies, Departmental Schools including Kendriya Vidyalaya, eligibility for Government quarters through general pool of CPWD, pension, right for the NPS employees to fight for the Old pension scheme, benefits available to the Defence Civilian Employees such as CSD while in service and after retirement etc., JCM scheme, Additional Meeting Mechanism, recognition rules of Trade Unions etc., will be completely taken away in a phased manner once OFB become a corporation.

7) The protections available to the Government employees under Article 309, and 311 of the constitution will be taken away.

8) The morale of the employees are not in favour of conversion of OFB into a Corporation and steering the process of change in their service conditions would be extremely difficult and there will be innumerable Court cases.

9)The Government with all its might and powers may arbitrarily take any decisions with regard to the future of OFB, however the Government cannot change the service conditions of the employees especially with regard to their status as a Central Government employees and as  Defence Civilian Employees.

10) All the existing employees have been selected through various selection process including All India Competitive Exams as Central Government Employees and Defence Civilian Employees. No were in their appointment order it is mentioned that one fine morning they all will be converted into an employee of a corporation / PSU. Today they are paid from the consolidated fund  of India / Defence services estimates. Government cannot take away all these benefits in the name of Corporatisation.


We have placed our considered views with logic, justification and reasons on all the 3 Strike demands. It is now for the DDP to consider all the above views expressed by the Federations and give a point wise reply/ position of the Government in each of the points which will help us for further discussion when we meet face to face in the coming days after 25/11/2020. We are still confident that the DDP instead of adopting an anti labour and rigid attitude should come forward with an open mind to discuss with the Federations and for reaching an amicable settlement, failing which there will be a disagreement and the matter may be  referred to the CLC for recording a failure report in accordance with the provisions of the ID Act 1947.

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