Ordnance Factory Board
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Ordnance Factory Board
A brief: Ordnance Factory Board
The Kalashnikov project
2020: pricing issues
At a time when Indian soldiers need new modern rifles due to heightened border tensions with both China and Pakistan, the much-touted project to make the iconic Kalashnikov assault rifles in India has run into rough weather yet again.
The defence ministry (MoD) earlier this month was forced to appoint a costing committee due to the “unreasonable and unacceptable” price quoted by the Indo-Russia joint venture to make 6.71 lakh AK-203 rifles, a derivative of the famous AK-47, at Korwa ordnance factory in Amethi district of Uttar Pradesh. Sources said defence minister Rajnath Singh discussed pending issues in the rifle project during his ongoing visit to Russia, where he met Russian deputy prime minister Yury Borisov and defence minister General Sergei Shoigu.
The five-member costing committee, set up by the MoD on June 11 by invoking a special clause of the Defence Procurement Procedure, has been asked to fix a “reasonable price” for manufacturing the basic version of the 7.62x39 mm calibre AK-203 rifle.
The joint venture IRRPL between the Indian Ordnance Factory Board (OFB) and Russian Rosonboronexport and Kalashnikov company, which was set up in February 2019, will have to perforce share pricing and other data with the costing committee. “The contract would have been inked by now if the OFB through the JV had submitted a proper bid. The manufacturing process for the urgently-required rifles would have begun in this project of national importance. But now, it has been inordinately delayed,” said a source.
The Defence Acquisitions Council headed by the defence minister had granted “acceptance of necessity” (AoN) to procure the 6,71,427 AK-203 rifles at an estimated price of Rs 4,358 crore way back in January 2019.
“But the JV first sought repeated extensions to submit its techno-commercial bid and then when it did in February this year, it quoted a price much higher than the benchmark price,” said the source.
Moreover, in a bid to reduce the price of the rifles at the JV’s request, the MoD had approved the incorporation of a price variation clause as well acceptance of corporate guarantee or indemnity bond in lieu of bank guarantees.
Separate quotes for the initial 1.2 lakh rifles and the rest 5.5 lakh guns to be made indigenously were also sought. But the OFB quoted a very high price as compared to the 5.56mm INSAS (Indian small arms system) and 7.62mm Trichy assault rifles it manufactures.
The committee, which has to submit its report in two months, will also determine the manufacturing cost of the AK-203 rifle after 100% indigenisation. It will also take into consideration the 2019 prices at which the OFB has manufactured the INSAS and Trichy assault rifles.
The AK-203 rifle project, headed by a serving majorgeneral, was supposed to be a boost for the over 14-lakh strong armed forces, which have been demanding new assault rifles for over 15 years to replace the existing glitchprone INSAS rifles. Army troops deployed on the frontline are now getting a limited quantity of just 72,400 new 7.62x51mm assault rifles with “a longer kill range” from the US firm SiG Sauer under the fast-track procurement route under the Rs 647 crore contract inked in February.
But the bulk of requirement was to be met through the AK-203 rifles, which have “an effective range” of 300-metre, and the armed forces are still waiting for the project to kick off.
2021: OFB split into 7 entities
NEW DELHI: In a major long-pending defence reform, the government on Wednesday approved the splitting of the floundering Ordnance Factory Board (OFB) and its 41 factories into seven corporate entities to improve its functioning as the main supplier of arms, ammunition and clothing to the armed forces.
The PM Narendra Modi-led Cabinet approved the “corporatization” of OFB, which has an annual turnover of around Rs 19,000 crore, into seven 100% government-owned entities dealing with ammunition and explosives, vehicles (tanks, combat and mine-protected vehicles, trawls), weapons and equipment (artillery and anti-aircraft guns, rifles), troop comfort items, optoelectronics, and parachutes. “It’s a big, historic decision from the point of view of national security. The restructuring will make OFB autonomous, more productive and cost-efficient as well as enhance quality and increase exports. The overall aim is to make India 'atmanirbhar’ (self-reliant) in defence preparedness,” said defence minister Rajnath Singh.
Singh, who heads the empowered group of ministers to oversee OFB’s transformation, took pains to assuage the concerns of around 70,000 OFB employees, who have earlier gone on strikes to protest against corporatization. “There will be no change in their service conditions (salaries, retirement and other benefits)…They should not be worried,” he said.
All OFB employees (Group A, B & C) belonging to production units will now be transferred to the corporate entities on `deemed deputation’ for an initial period of two years, without altering their service conditions as central government employees.
The OFB overhaul is desperately required in the backdrop of the 13-lakh strong Army repeatedly sounding the alarm over the unacceptably high number of accidents, deaths and injuries taking place in the field due to the poor and defective quality of ammunition being supplied for tanks, artillery, air defence and other guns, as earlier reported by TOI.
With OFB supplying around 90 of the total 163 types of ammunition used by the Army, the force has been reporting at least one accident per week, on an average, over the past several years.
The problems plaguing the OFB range from the high costs of products due to excessive overhead charges to inconsistent quality and huge delays in supplies. OFB also suffers from an utter lack of innovation and technology development. As per a rough estimate, nearly 75% of the production by OFB units is based on imported technology, said officials.
The government assessment is that OFB corporatization will help increase its turnover to Rs 30,000 crore by 2024-25, enhance its exports to 25% of the turnover, and increase self-reliance in technology from the existing 20-25% to 75% by 2028-29.
“The Cabinet decision will allow the seven new companies autonomy as well as help improve accountability and efficiency in the functioning of the 41 factories under them,” said an official.
“It will help overcome various shortcomings in the existing system by eliminating inefficient supply chains and provide these companies incentive to become competitive and explore new market opportunities, including exports. As a subordinate office of the defence ministry till now, OFB could not retain profits and therefore had no incentive to make profits,” he added.