The Author is Former Director General of Information Systems and A Special Forces Veteran, Indian Army

In a joint letter addressed to the Defence Minister on September 4, 2023, the All India Defence Employees Federation (AIDEF), the Confederation of Defence Recognised Associations (CDRA) and the Bharatiya Pratiraksha Mazdoor Sangh (BPMS) has asked the government to withdraw the “failed” experiment of corporatisation of the ordnance factories. The letter says that “the Employees Organisations right from the beginning is opposing corporatisation of ordnance factories and our considered position that Corporatisation of Ordnance Factories and splintering the erstwhile OFB into seven “non-viable” Corporations is a failed experiment.”

Employee unions call for the government to withdraw the “failed” experiment of corporatisation of the ordnance factories

The letter claims that their stand is vindicated with the latest government decision for merging the two Corporations (YIL & GIL) with other Corporations, and handing over the IOL (India Optel Limited, Dehradun) to Bharat Electronics Limited (BEL), a 51 per cent owned government company, thereby reducing the numbers of ordnance factory corporations into four DPSU’s. 17 questions have been raised in the said letter, gist of which is: within two years of corporatisation as per the KPMG’s five-year road-map, why another consultant was hired and more changes are being made by the “same” government; did the bureaucrats who proposed to the cabinet implementing the KPMG Report not show due diligence for “personal gains” – due to which national security is now at stake; turnover of “all” the NDCs (New Defence Corporations) are nowhere near 30,000 crore and some of them are making losses - who is responsible for this misadventure; why is the new plan being referred to SBI Capital Markets; government reiterated repeatedly including in the High Court that “the employees will continue to be central government employees on deemed deputation to the new corporations unless they themselves opt to get permanently absorbed in these new corporations – how can this commitment be violated by handing over the IOL and its employees to BEL?

The letter further states that “If this continues, then we will be forced for serious action programmes in the coming days in protest against the continuing attack and injustice being meted to the employees of Ordnance factories for no mistake of theirs.”

Corporatisation of the Ordnance Factory Board (OFB) and 41 Ordnance Factories (OFs) was a wrong step in the first place; they should have been privatised. The mistake was compounded by transferring the same manpower and management and with the same work culture in the new set ups.

The above is no surprise and was bound to happen. It was pointed out in these columns earlier that corporatisation of the Ordnance Factory Board (OFB) and 41 Ordnance Factories (OFs) was a wrong step in the first place; they should have been privatised. But they were not privatised because of the bureaucracy and the money being made on the side. The mistake was compounded by transferring the same manpower and management and with the same work culture in the new set ups. The Comptroller and Auditor General had been periodically pointing out endemic corruption in the DRDO-OFB-OF-DPSUs.

Many cases of corruption by ordnance factories came into public domain. In one case, the Army had written to the Ministry of Defence (MoD) that the amount of defective ammunition supplied by the ordnance factories could have financed procurement of 100 medium artillery guns. In another case, a complete batch of one crore indigenous rounds of Tavor assault rifles was found defective. But no heads rolled because of the bureaucratic nexus. The cost effectiveness of cumulative money being poured into the governmental defence entities is huge but never related to their output. Manipulated data hides the losses. But some of them have been loss-making and the above letter by the AIDEF, CDRA and BPMS confirms some of them are in the red.

Developed nations with modern militaries rely on civil industry for procuring military systems and equipment. The exceptions are communist countries like China and Russia where individual corruption implies certain death, which cannot be practiced in a chaotic democracy like ours. The bureaucracy went for a 5-year corporatisation plan of OFB-OF because it suited it then and today has changed it because of someone thinking differently. Long-term planning has never been the forte of the bureaucracy – adhocism rules the roost.

If we want to catch up with China, the Prime Minister will need to take the hard decision to privatise the DRDO and the DPSUs

The Confederation of Defence Registered Associations comprises multiple unions including the BJP-affiliated Bhartiya Pratiraksha Mazdoor Sangh (BPMS), Left Front-affiliated All India Defence Employees' Federation (AIDEF) and Congress-affiliated Indian National Defence Workers' Federation (INDWF). It is the vote-bank politics that have held back privatisation of the governmental defence-industrial complex which resembles a white elephant. These unions went on strikes with no concern about the Chinese aggression in eastern Ladakh during 2020. Government may have passed an ordinance that workers of DPSUs are not allowed to go on strikes but rest assured, the AIDEF, CDRA and BPMS will go on strike if their demands are not met, the 3-year long India-China standoff along the entire length of the LAC notwithstanding. The possibility is more with the approaching general elections, fifth columnists and inimical forces, both internal and external, making efforts to destabilise India.

The question is where do we go from here? The government has set up a nine member committee to review and redefine the role of the DRDO. There were multiple committees spanning a number of years to review the organisation of the OFB and the 41 ordnance factories as well but the systemic fault lines remain unaddressed. Whether the same will happen in the review of the DRDO only time will show. But if we want to catch upwith China, the Prime Minister will need to take the hard decision to privatise the DRDO and the DPSUs; the manner in which he demonetised the old currency and the 2,000 notes. Bit by bit disinvestments would hardly suffice. Whether political expediency and voter consideration would allow this is a different issue.