Profit Loss Figures Of Ordnance Factories Not Comparable When Accounting Standards Are Different : C. Srikumar

MoD is claiming artificial profit of the new Ordnance Factory Companies, opines General Secretary of AIDEF

Opinion Piece

C. Srikumar, General Secretary, AIDEF

The Ministry of Defence issued a press release on 29-04-2022) stating that the 7 new Companies carved out of erstwhile Ordnance Factory Board have turned their performances around and that six of them have reported provisional profits in their first 6 months of business.

The press release further states that the companies have achieved a combined turn over of more than Rs. 8400 Crores and have also managed to bag some export contracts. The Federations of Defence civilian employees have not still accepted the Corporatization of Ordnance Factories.

The AIDEF have already challenged the Government decision in the Madras High Court and they are continuing their struggle demanding that Government should withdraw the Corporatization and bring back Ordnance Factories in the Government setup and they are also demanding that as assured by the Government in the Madras High Court the status of the 75,000 employees of Ordnance Factories should remain as Central Government Employees / Defence civilian employees as was done by the Government for the Prasar Bharti employees.

After the above press release issued by the Ministry of Defence and subsequence tweet by Rajnath Singh, Defence Minister and Defence Secretary appreciating the performance of the 7 Companies in a short period of 6 months, C. Srikumar, the General Secretary of All India Defence Employees Federation expressed his views to –

According to him, first of all, Ordnance Factories are not established for earning profit. Ordnance Factories was all along running on a no profit, no loss basis and the share of the Armed Forces was close to 80% in the value of issues (VOI) of the Ordnance Factories. All of a sudden it is being shown by the MoD that the Ordnance Factories were running on loss during 2018 – 19 , 2019-20 and 2020-21 and first half of 2021-22 and overnight from 01-10-2021 it has started earn profit. The Government some have wanted to justify that Corporatization of Ordnance Factories was a successful exercise and that it has started yielding results.

True picture will emerge only when the balance sheet is made of these 7 companies. What is the basis of these figures given by the MoD nobody knows. We also fail to understand that what is the basis on which this turnaround has been shown by the MoD.

The payment given by the Government to the suppliers and vendors and the various expenditures made for the production activities up to 30/09/2021 from the consolidated fund of India is not reflected while working out the profit and loss for the period from 01-10-2021 onwards. If those costs are included then from where the profit will come has to be clarified by these 7 companies and the Ministry of Defence. On a perusal of the 22 nd report of the Parliamentary Standing Committee of Defence the profit earned by Ordnance Factories was Rs.472.82 Crores, for the year 2019 – 20 the profit was Rs.195.83 crores and for 2020-21 it was Rs. 6.74 Crores. On the basis of the productivity of the Ordnance Factories the employees were paid productivity linked bonus for all the above period, When this is the fact how it is stated in the 29nd Parlimentary Standing committee report that the same period the Ordnance Factories on running of loss.

If so then the CGDA who is responsible for the Accounting of the Ordnance Factories prior to 01-10-2021 has to be questioned and necessary action may be taken for not doing proper accounting. Reports are not comparable when the Accounting standards are different. Moreover the7 PSU’s need not add the expenditure on Hospitals and schools in their overhead expenditure as this expenditure after 01-10-2021 is being born by the Government of India through the Directorate of Ordnance. There are contradictions between the Standing Committee reports. There is non transparency in reporting of profit as no details are given in the press release.

While there was profit of OFB for 2018-19, 2019-20, 2020-21 as per 22nd report, now loss has been reported. The figures are dubious and misleading. The fact that two data of cost saving are not comparable, as the employees of Ordnance Factory hospitals and schools are now under the DOO. Hence savings is expected to be more. Moreover, the employees strength are being reduced every month considerably due to retirement. Even more than 50 percent of the contract employees are thrown out of job. Therefore we are not in a position to believe the rosy picture being given by the 6 Companies and the MoD.

It is estimated that there is a saving of more than Rs.200 crores due to reduction of manpower and reduction of the strength of contract workers apart from the reduction in expenditure of schools and hospitals. Government should dispassionately analyze the performance of Ordnance Factories prior to corporatization and post corporatization taking all the factual position and not to make it a prestige issue by manipulating the figures to show some have to the outside world that over night everything has changed in the Ordnance Factories because of Corporatization. This is my immediate reaction but I have to conduct in-depth study and discuss with my colleagues before taking up the matter with MoD. However it is better to undertake an independent study to audit the performance as compared to other DPSU’s rather than comparing with some concocted figures.

This is an opinion piece and views expressed here are strictly those of C. Srikumar, General Secretary of All India Defence Employees’ Federation (AIDEF)

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