Central Govt forms EGoM to corporatize 41 Ordnance Factories

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The GoM was formed under the chairmanship of Defense Minister Rajnath Singh.

Consultancy agency was also appointed to advise the government.

New Delhi, 11 September: The Central Government has constituted an Empowered Group of Ministers (EGoM) under the chairmanship of Defense Minister Rajnath Singh to corporatize the Ordnance Factory Board (OFB) under which 41 factories are located.

Earlier on Thursday, a consultancy agency has also been appointed which will advise the government to move in this direction.

The central government has decided to convert the Ordnance Factory Board (OFB) into one or more than one hundred percent government-owned corporate entities.

In view of this, the government has constituted this empowered group of ministers.

In this GOM, apart from Defense Minister, Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Law and Justice Minister Ravi Shankar Prasad, Minister of State for Labour and Employment Santosh Kumar Gangwar and Minister of State for Personnel, Public Grievances and Pensions Jitendra Singh are included.

The group will decide on converting OFB into a single Defense Public Sector Undertaking (DPSU) or multiple DPSUs.

Apart from this, it will also take a decision on the financial assistance given to the unit / institutions to make the salary and pension of the existing employees safe, financially viable and self-reliant.

Moving forward with a long-term proposal for corporatization of Ordnance Factory Board (OFB), the Defense Ministry on Thursday announced the appointment of private sector advisors who would advise the government to move forward.

KPMG Advisory Services Private Limited (Lead Consortium Member) has been selected with Khaitan & Company Limited as the Consultancy Agency.

However, around 82,000 employees of OFB have strongly opposed this move of the government and have called for an indefinite strike from October 12.

Since independence, OFB and its factories are wholly owned by the Ministry of Defense. And all three build defense equipment to meet the needs of the armies.

In fact, the Defense Ministry has also agreed on the complaint of the Army that the production cost of OFB is very high because its production value is very low per employee. Therefore, the government has decided to corporatize the factories of Ordnance Factory Board on the Defense Public Sector Undertaking model so that production pressure can be increased according to the target.

Right now the defense public sector undertakings are not owned by the Ministry of Defense but they are obliged to meet the production targets set by signing a MoU with the Ministry every year.

Finance Minister Nirmala Sitharaman made the announcement on May 16 for incorporation of Ordnance Factory Board. She said that OFBs were incorporated as part of measures to strengthen defense industry. The move will improve the autonomy, accountability and efficiency of armament supply.

Similarly, Prime Minister Narendra Modi also committed himself on August 27 to form the OFB Corporation.

โ€œOrdnance factories were run like government departments for decades, but now we are moving towards making these factories a corporation. In the same way, there are many more,โ€ said PM.