Ordnance Factory Corporatization: Government Cannot Ignore Employees’ Verdict, Says AIDEF General Secretary

Five years after the corporatization of the Ordnance Factory Board (OFB), the Government may be celebrating the performance of the seven successor Defence Public Sector Undertakings (DPSUs), but employees and their trade unions continue to reject the restructuring.

Speaking to INDIANPSU.COM, C. Srikumar, General Secretary of the All India Defence Employees Federation (AIDEF), said employees once again boycotted the Corporation Day celebrations on October 1 and reiterated their demand that the Ordnance Factories be restored to their earlier status as a Government organisation under an Ordnance Factory Board.

The Government has cited a sharp increase in production and exports as evidence of the success of corporatization. According to the Ministry of Defence, production by the erstwhile OFB network increased from ₹12,755 crore in FY 2019-20 to ₹26,282 crore in FY 2025-26, while exports rose from ₹81 crore to ₹4,561 crore over the same period.

Srikumar, however, questioned whether FY2019-20 is an appropriate benchmark.

‘Government is comparing against a depressed base’

According to Srikumar, FY2019-20 was immediately followed by the unprecedented disruption caused by the COVID-19 pandemic, which affected industrial activity, procurement cycles, production planning and supply chains.

He argued that comparing post-pandemic production with the disrupted FY2019-20 base naturally produces dramatic growth figures.

“A more meaningful benchmark would be the stronger years of the OFB system before the pandemic,” Srikumar said.

He pointed to data from the Comptroller and Auditor General of India showing that the OFB supplied materials worth ₹20,876 crore in FY2016-17.

According to his calculation, that figure would be equivalent to approximately ₹32,000-33,000 crore at 2025-26 price levels—substantially above the ₹26,282 crore production figure being highlighted by the Government.

Seven DPSUs versus one OFB: Is it a like-for-like comparison?

Srikumar also challenged the methodology used to compare the performance of the seven DPSUs with the erstwhile OFB.

Under the OFB structure, the factories functioned as components of a single integrated organisation. Supplies moving from one factory to another were essentially internal transfers and did not constitute sales to an external customer.

After corporatization, the OFB was divided into seven separate companies. Transactions between these entities can therefore become inter-company transactions and form part of the turnover of individual companies.

According to Srikumar, this fundamentally changes the accounting picture.

The historical OFB Value of Issues primarily represented supplies to the final customers, particularly the Armed Forces and other authorised users. The present combined production or turnover figures, on the other hand, aggregate the output of seven separate corporations.

This means that supplies moving between the successor DPSUs can potentially appear in the individual turnover figures before the final product reaches the ultimate customer.

Srikumar therefore argued that the two sets of figures cannot automatically be treated as a like-for-like comparison.

The appropriate comparison, he said, would require either removing inter-company transactions from the current figures or comparing the current DPSU output against OFB’s gross production after accounting for inter-factory movements.

‘OFB was not the chronically underperforming organisation it is made out to be’

Srikumar further disputed the perception that OFB was inherently an inefficient or chronically underperforming organisation.

The ₹20,876 crore gross material supplies recorded in FY2016-17, he argued, demonstrate that OFB was operating at a considerably larger economic scale than is often acknowledged.

Adjusted for inflation, the figure would exceed ₹32,000 crore in today’s prices, he said.

In his assessment, this puts a different perspective on the Government’s current narrative about the transformation brought about by corporatization.

Private sector emerges as a major beneficiary

Srikumar said he was not entering into the performance of each of the seven DPSUs individually at this stage. Instead, he highlighted what he described as a more significant development—the rapid strengthening of India’s private defence industry.

Private companies have expanded their presence across ammunition, artillery, armoured systems, electronics and aerospace manufacturing, increasingly competing for opportunities that would earlier have been naturally associated with the OFB ecosystem.

This, he said, has created a paradox.

Corporatization was intended to create stronger and more commercially competitive public-sector defence companies. Yet, according to Srikumar, private industry appears to have gained considerable strategic momentum across several segments of the defence manufacturing sector.

99.5% employees choose Government service

The strongest argument against the Government’s corporatization narrative, Srikumar said, comes from the employees themselves.

Under the ongoing option exercise, employees have been given the choice of continuing as Central Government employees until retirement or opting for absorption into the seven DPSUs.

According to Srikumar, 99.5% of employees have opted to remain Central Government employees until retirement rather than move into the corporatized entities.

For the AIDEF leader, the overwhelming employee preference is a clear verdict against corporatization.

“A reform that is celebrated by the management but rejected by the overwhelming majority of employees raises legitimate questions regarding its overall success claimed by the Government,” Srikumar said.

Five years after corporatization, the dispute therefore remains far from settled. While the Government points to higher production and exports as proof of success, the employees’ continued opposition—and their overwhelming preference to retain government-employee status—keeps the fundamental question alive: has corporatization actually delivered the transformation promised, or has the Government’s success story been built on comparisons that do not tell the complete story?