The Union Cabinet on Wednesday decided to dissolve the Ordnance Factory Board, set up by the British in 1775, and replace it with seven companies under Defence Ministry -- each for a specific manufacturing purpose -- subsuming the 41 OFB factories.
Sources said the restructuring of the OFB-India's main producer of arms and ammunition -- was aimed at transforming the ordnance factories into productive and profitable assets; deepening product specialisation enhancing competitiveness and improving quality and cost-efficiency.
The functioning of the OFB came in for review by various high-level committees over the last two decades with the objective of improving their performance.
All employees of OFB (Group A, B & C) belonging to the production units would be transferred to the corporate entities on deemed deputation initially for a period of two years without altering their service conditions as central government employees.
Currently, the OFB is a subordinate office of the Department of Defence Production because of which decisions like modernisation of plant and machinery, entering into joint ventures with other firms and technology transfer agreements are subject to government rules.
Also being a government department, OFB can't retain profits and therefore has no incentive to make profits. All such factors reduce its operational flexibility that is generally associated with any production and marketing unit.
As per the new structure, the ammunition and explosives group would be engaged in the production of ammunition of various calibre and explosives with huge potential to grow exponentially. The company would also aim to make ammunition for the world market, sources said.
Similarly, the vehicles group that would produce defence mobility and combat vehicles like tanks, trawls, BMP and mine protected vehicles, is expected to increase its share in the domestic market and explore new export markets.
The weapons and equipment group would be engaged in the production of small arms, medium and large calibre guns and other weapon systems and is expected to increase its share in the domestic market through meeting domestic demand as well as product diversification.
In addition, troop comfort items group, ancillary group, optoelectronics group and parachute group constitute the entire structure.