Defence manufacturing acquires wings, 7 new Companies rise today


  • Rajnath Singh

“Deh Shiva var mohe ehe, Shubh karman te kabhun naan Darroon”.

It takes a lot of grit, commitment and resolve for initiating and completing any major reform. Changing the status quo while meeting the competing aspirations of the stakeholders needs a fine balancing act. However, our Government, under the able guidance of our Prime Minister Narendra Modi, has never hesitated to take strong decisions and undertake reforms which are beneficial and in the long term interests of the nation.

Self- reliance in defence has been the cornerstone of India’s defence production policy. The recent call for “Atmanirbhar Bharat” by our government has provided further impetus to realise this goal. Indian Defence industry, primarily catering to the needs of the armed forces, has evolved with a diversified product mix and market. Propelled by the recent successes in exports, India is set to realize its potential as an emerging defence manufacturing hub. We aim to bring India amongst the top countries of the world in Defence sector, from design to production with enhanced reach to market including exports through active participation of public and private sector.

Since 2014, the Government of India has brought many reforms in defence sector to create a conducive ecosystem for exports, FDI and to provide stimulus to demand for indigenous products. The historic decision to convert Ordnance Factory Board, a subordinate office of the Ministry of Defence, into 7 new 100% Government owned Corporate entities to enhance functional autonomy, efficiency and unleash new growth potential and innovation is arguably touted as one of the biggest in this series.

Ordnance Factories have a glorious history of more than 200 years. Their contribution to the national security has been immense. Their infrastructure and skilled manpower is an important and strategic asset for the country. However, over the last few decades, concerns have been raised by the Armed Forces relating to high costs of OFB products, inconsistent quality, and delays in supply.

There were various shortcomings in the existing system of OFB. OFB had the legacy of producing everything within the OFs, resulting in inefficient supply chain and lack of incentive to become competitive and exploring new opportunities in the market. There was lack of specialization, with OFB engaged in production of wide range of items under one umbrella.

This decision to create 7 new corporate entities is in line with the evolution in models of business governance. The new structure would provide these companies incentive to become competitive and transform the Ordnance Factories into productive and profitable assets through optimal utilisation; deepen specialization in the product range; enhance competitiveness while improving quality and cost-efficiency and usher in a new age of innovation and design thinking.

While implementing this decision, the Government has assured that the interests of the employees are protected.

The 7 new companies have now been incorporated and have also commenced their business. Munitions India Limited (MIL) which would be mainly engaged in production of ammunition of various caliber and explosives, has huge potential to grow exponentially, not only by way of ‘Make in India’ but also by ‘Making for the World’. Armoured Vehicles company AVANI would mainly engage in production of combat vehicles such as Tanks and Mine Protected Vehicles and is expected to increase its share in the domestic market through better capacity utilization and can also explore new export markets. Advanced Weapons and Equipment (AWE India) would be mainly engaged in production of Guns and other weapon systems, is expected to increase its share in the domestic market through meeting domestic demand as well as product diversification and so would be the case with other four companies.

The Government has also assured that most of these new companies have sufficient work load, all the pending orders with OFB which have been converted into deemed contracts worth more than Rs. 65,000 Crore.
Moreover, through diversification and exports, the new companies have huge potential to grow including in dual use items for civilian use and through import substitution.

A new beginning has been made. While the Ordnance factories were earlier mandated to just cater to needs of the armed forces, the new companies now would look beyond that mandate and explore new opportunities, both in India and abroad. The greater functional and financial autonomy would allow these new companies to look for modern business models and newer collaborations.
We are currently focusing on multiple thrust areas to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports. It is envisaged that these new companies, along with the existing public sector companies would work hand in hand with the private sector to build a strong Military Industrial Ecosystem in the country. This would help us minimize imports by planning for indigenous capability development well in time and divert such resources for indigenous procurement. If successful, our economy will attract investments and generate new employment opportunities.

There are various challenges ahead. It is difficult to change the age old traditions and working culture overnight. I understand that this is a beginning of a very complex transformation process and our Ministry would provide all support in resolving the teething issues and in guiding and converting this newly formed companies into viable business entities. I am confident that the employees and the management of the new companies would sow the seeds for a new organization culture so that their businesses are transformed and revitalized.

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