Ordnance Factories Are Not Guinea Pigs For Experiments : C. Srikumar, General Secretary, AIDEF

Less than 2 years of Corporatization of 41 Ordnance Factories into 7 DPSUs, the Government has now appointed SBI Capital Markets Limited (SBICAPS) another consultant to recommend for merger of YIL and MIL, TCL and GIL and IOL and BEL. The Cabinet had decided in 2021, to splinter the Ordnance Factory Board into 7 Corporations based on the recommendations of the KPMG Consultants. The KPMG Consultants has prepared its Report with 5 years roadmap post Corporatization of Ordnance Factories. The AIDEF, BPMS and CDRA who are still continuing their protest against Corporatization of Ordnance Factories have now reacted very strongly against the Government’s move to appoint SBI Capital Markets Limited (SBICAPS).

The Federations apprehend that the move of the Government is to list the Ordnance Factories in the market and then to ultimately privatize them. In this regard the AIDEF, BPMS and CDRA have submitted a detailed representation to the Defence Minister in which they have questioned the decision of the Government which has been taken based on the recommendations of the KPMG Consultants and they have also questioned the role of the MoD Officials who were responsible for approving the recommendations of the KPMG Consultants.

www.indianpsu.com accessed a copy of the joint Letter submitted on 04 th of September, 2023 to Rajnath Singh the Defence Minister. While interacting this issue with
C. Srikumar, General Secretary of AIDEF he responded querulously stating that Ordnance Factories are not guinea pigs to do all types of experiments on them. He also stated that the Government is answerable that why the OFB was splintered into 7 Companies and now within a short span of 2 years why the Government is asking another
consultant to reduce the 7 companies to 4 companies. Why a course change is required after just 2 years. We anticipated all these and that is why from the beginning we are vehemently opposing the Government decision to corporatize the Ordnance Factories. How can the Government go back from its own commitment that the 7 DPSUs will be 100% owned by the Government. The purpose of referring the matter with SBI Capital Markets Limited (SBICAPS) is nothing but to make a plan to list the Ordnance Factory Corporations in the Market and then to privatize the same. Is it in the interest of the Country?, destroying the Ordnance Factories means the Government is compromising with national security. The KPMG and the MoD Officials have misled the country by stating that Corporatization of Ordnance Factories will improve accountability and efficiency. All these have failed and who is going to be accountable for the nation for such a debacle. Therefore, the AIDEF, BPMS and CDRA have very rightly pointed out all the defects and the aberrations in the Government’s unilateral decision to corporatize the Ordnance Factories concluded C.Srikumar / General Secretary of AIDEF The contents of the joint Letter issued by the AIDEF, BPMS and CDRA is published here for the benefit of the viewers of www.indianpsu.com –

To,
Shri. Rajnath Singhji
Hon’ble Defence Minister
Government of India,
South Block, New Delhi – 110 001.

Subject : Corporatization of Ordnance Factories a Failed Experiment – request for withdrawal of the same.

Respected Sir,
The Employees Organizations right from the beginning is opposing Corporatization of Ordnance Factories and our considered position that Corporatization of Ordnance Factories and splintering the erstwhile OFB into 7 non-viable Corporations is a failed experiment, stands vindicated with the latest Government’s decision for asking the SBI Capital Markets Limited (SBICAPS) for merger of the existing 2 Corporations (YIL & GIL) with the other Corporations and handing over the IOL to the BEL, a 51% owned Government Company thereby reducing the numbers of Ordnance Factories Corporations into 4 DPSU’s.

The above latest decision of the Government raises the following questions not only before the employees of the Ordnance Factories but also before the General Public of this Country.

1) The capability of M/s KPMG Advisory Services Pvt. Ltd with M/s. Khaitan & Co Ltd who had recommended corporatizing the Ordnance Factories as 7 DPSU’s with 5 Years Roadmap.

2) Reappointment of another consultant for similar scope of study within 2 years of Corporatization indicates that the above consultants did not undertake the study properly. Government has accepted the recommendations of the consultants and now the same government approaching another consultant is a clear proof that the recommendations of the KPMG Advisory Services Pvt. Ltd has completely failed. The recommendation that OFB should be corporatized has failed.

3) The Bureaucrats whoever has proposed to the Cabinet for implementation of the KPMG Report did not undertake due diligence.

4) The doubts which we were raising that the bureaucrats had malafide intention of making a study without assuring quality of report for personal gains, which is in anyway dereliction of their duty and a national crime considering safety, security of the Nation was at stake has now become true. They ensured that they get promotion and posh posting at the cost of destroying the Defence Industry viz. the Ordnance Factories and thereby compromising with the National Security.

5) It is with such dubious intention that the then officials of MoD had kept relaxed norms for Bank Guarantee for 18 months only while the job of the Consultant was to create a 5 Year Roadmap.

6) The entire decision taken by the Government to Corporatize the Ordnance Factories has become a failed experiment. The Turnover of all the NDCs are nowhere near to Rs 30000 Crore and some of them are making losses. Who is responsible for this misadventure?

7) Why at the first instances the Ordnance Factories were splintered into 7 DPSU’s and now why it is being planned to be merged?

8) Whether things did not work the way it was planned by the MoD?

9) Why it is being referred to SBI Capital Markets, that means there is a plan by the Government to list the Ordnance Factories Corporations in the Market?

10) Why the alternative proposals and the robust proposals given by us in writing to the DDP for retaining the OFB as a Government Organization was not considered and what is the intention behind rejecting these proposals without even arranging a meeting of the Federations and CDRA with the EGOM?

11) Why the KPMG Report was not shared to us despite our repeated request?

12) Why the DDP has ignored the fact that Ordnance Factories are war reserve and idle capacity to be maintained to meet any eventualities?

13) In the Counter Affidavit filed by the Government in the High Court’s it is stated by the DDP that “The Petitioners are misleading the Hon’ble High Court.” It is not the Federations and the CDRA which has misled, it is the KPMG who has misled and the Officials who approved the KPMG recommendations and not the stake holders like us.

14) Again it was stated in the Counter Affidavit by the DDP that “It is submitted that national defense interests of war preparedness are more important than the narrow sectarian interests of certain employees.”

Is the employees are narrow sectarian or the Officials responsible for appointing KPMG Consultants and paying huge money for them for creating 7 new DPSUs and now asking another consultant for reducing it to 4 DPSUs and to handover IOL to BEL are narrow sectarians. This needs to be answered.

15) The Cabinet has approved that the Ordnance Factories Corporations would be 100% Government Owned Corporate Entities registered under Companies Act, 2013. This has been reiterated by the MoD in the Counter affidavits filed before the Hon’ble High Courts. In violation of this, how the MoD is proposing to merge IOL an 100% Government Owned DPSU with BEL which is only 51% owned by the Government. We will have no options left to approach Court for Contempt, if Government insists on offloading the shares and move for merger with BEL.

16) On a study of the Terms of Reference to the SBI Capital Markets and also the Terms of Reference to the KPMG Advisory Services Pvt. Ltd. it is nothing but a duplication of the activities for which study was done only 2 to3 years back Repetition of such consulting is a waste of public money. It is pertinent to mention here that when the KPMG Advisory Services Pvt. Ltd. was appointed as the consultant, a complaint was filed with CVC in which the following has been categorically stated “It is seen that the EOI-cum-RFP stated that the Performance Guarantee should be valid for a period of 18 months and the Performance Guarantee shall contain a claim period of three months from the last date of validity. The Consultant has been asked to create a 5-year strategic vision and roadmap, whereas the Bank Guarantee has been asked for a period of 18 Months with three months validity. In all likelihood, the consultant will run away with public money after 1 year and a BG for 18 months, when he is creating a blue print for 5 years, again casting doubts about the integrity of MOD officials.”

17) As regards the service conditions of the employees the Government has reiterated several times including in the High Court that “the employees will continue to be Central Government Employees on deemed deputation to the new Corporations unless they themselves opt get permanently absorbed in these new Corporations”. How the Government can violate this commitment by handing over the IOL and its employees to BEL.

Apart from the above 17 questions / grounds which proves that Corporatization of Ordnance Factories is a wrong decision taken by the Government, it is pertinent to recollect the following message given by the Hon’ble Defence Minister to the Nation on the Occasion of “Vijayadashami” in New Delhi on October 15,2021. The objective of this restructuring is to transform Ordnance Factories into productive and profitable assets; improve expertise in product range; increase competitiveness; improve quality; enhance cost-efficiency and ensure self-reliance in Defence preparedness.

However now with all the above developments, the Cabinet decision and the assurance of the Government before the Hon’ble High Court that the 7 Ordnance Factories Corporations will work as 100% Government owned Companies has become false, since the Government is once again asking another consultant for restructuring the Ordnance Factories. On perusal of the objectives of SBICAPS, it is seen that their expertise lies in Project Advisory & Structured Finance, Equity Capital Markets and Debt Capital Markets. From their role, it is evident that GOI is planning to offload the shares of 7 Ordnance Factories Corporations, going back on their commitment of 100% Government owned equity. Therefore it clearly brings out that all is not well in the Ordnance Factories Corporations despite the tall claims being made by the Ministry of Defence from time to time that the DPSU’s are performing well.

With the MoD’s policy of disinvestment in Defence PSU’s already the Government has decreased its share holding in the other DPSU’s such as BEL, BEML, BDL, HAL, MIDHANI, GRSE & MDL and with government decision appointing the SBI Capital Markets Limited (SBICAPS) as the second consultant in the name of restructuring of Ordnance Factories and its proposal to handover IOL to BEL clearly indicates that disinvestment will start soon in the other Ordnance Factories Corporations also.

From the above, it is amply clear that the experiment of corporatizing the Ordnance Factories has miserably failed and it is going to have a very serious impact on the National Security of the Country. Now the time has come for the Government of India to retract the decision of Corporatization of OFB and to restore back its status as it was existing on 30.09.2021 and to start deliberations with us for the improvement of functioning the Ordnance Factories as already proposed by us in our joint proposals in the past as a Government Organization.

Sir, we would like to meet your honor in person to discuss the entire matter at the earliest. We would like you to publish a White Paper through an independent third party about goals of Corporatisation as envisaged and as brought out in contract vis a vis the realization and fix responsibility to the defaulting actors in the entire process since things in the Ordnance Factories have worsened so much post Corporatization.

Despite our repeated representations to the MoD / DDP the issues are not getting resolved, rather more and more issues and problems against the Ordnance Factories and its employees are cropping up. If this continues then we will be forced for serious action programmes in the coming days in protest against the continuing attack and injustice being meted to the employees of Ordnance Factories for no mistake of theirs.

Awaiting for a positive response from your honor.