Corporatisation of Ordnance Factories
DATE: 19 SEP 2020
The Cabinet Committee on Security in its meeting held on 29.07.2020, has approved to convert Ordnance Factory Board (OFB), a subordinate office of Ministry of Defence, into one or more than one 100% Government owned corporate entities, registered under the Companies Act 2013.
The Corporatisation of OFB will improve its autonomy, accountability and efficiency in Ordnance Supplies.
On the issue of corporatization of OFB, the Federations of Defence Employees working in Ordnance Factories observed a Strike from 20/08/2019 to 25/08/2019. Strike marginally affected the normal production activities in all 41 factories for five working days. Normal production resumed across all factories from 26th August 2019 onwards.
The Department of Defence Production has been continually engaging with the Federations and Associations of Ordnance Factories with regard to their views on the said transformation. An Empowered Group of Ministers (EGoM) has been constituted under the chairmanship of Minister of Defence to oversee and guide the entire process of corporatisation of OFB, including transition support and redeployment plan of employees while safeguarding their wages and retirement benefits.
Previously in May 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was opened up to 100% for Indian private sector participation, with Foreign Direct Investment (FDI) up to 26% both subject to licensing. Further, Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry vide Press Note No.5 (2016 Series)’, has allowed FDI under automatic route upto 49% and above 49% through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded. Further, FDI in defence industry sector is subject to industrial license under Industries (Development & Regulation) Act, 1951 and manufacturing of small arms and ammunition under the Arms Act, 1959. As per the data furnished by 37 companies in Defence and Aerospace sector, so far (i.e. till June, 2020). FDI inflows of over Rs 2883 crores have been reported in Defence and Aerospace sectors through automatic route. Further, FDI inflows of over Rs.1849 crores have been reported in Defence and Aerospace sectors after 2014 through automatic route.