Once upon a time there was an Ordnance Factory Council
Dussehra was a fitting occasion to officially inaugurate the seven new defense PSUs in place of the old Ordnance Factory Board (OFB) and its 41 constituent factories. The Kolkata-based OFB, once synonymous with India’s slowing defense production activity and slowly expanding National Military Industrial Complex (MIC), has become part of archival history. No tears have been shed since OFB’s disappearance had been on the cards for fifteen to twenty years. In welcoming the new Defense PSUs, an appropriate OFB obituary is warranted, as its continued downfall and subsequent demise may have business lessons for new PSUs.
Kolkata may have been the hub of industrial settlement during British times when the East India Company began its political journey to India. With the political transfer of power to Delhi, however, the city morphed into a necropolis with little innovation in industrial production and work culture. The Ayudh Bhawan building on the banks of the Hooghly River in Kolkata, home to the OFB headquarters, represented the colonial industrial labor culture in the post-colonial period. Imbued with brutal arrogance of power, the OFB refused to see the changing industrial environment and appropriated all political privileges – be it production targets for individual factories or even the cost of weapons produced. in different factories. It didn’t matter to OFB that one of the said factories was far away in Arvankadu in Tamil Nadu. In addition, Ayudh Bhawan’s mandarins had absolutely no clue and rather no interest in national expectations regarding weapons needs. Despite two centuries of global existence and a massive proliferation of its workforce since independence, the OFB has simply failed to come close to the expected benchmarks in weapons production. Its share in the national production of arms as well as the export figures have always remained insignificant!
The malaise was rather well institutionalized and pervasive in all the factories. Each factory was a “domain in the state”. This is where the general managers lived like kings in these seven to eight acre bungalows inherited from the colonial masters with their state of mind. The presence of six to seven servant quarters in these bungalows further intensified the high sense of self-worth among these post-colonial lords. It didn’t matter if the maintenance of these bungalows absorbed a substantial part of the office contingencies, year after year. It also didn’t matter that workers’ living quarters remained in poor condition in almost all factories, instead becoming a lair for cobras, pythons and even leopards. Within the factory, fossilized bureaucrats posed as production managers even though actual production never increased. The production lines, i.e. plant and machinery, in many cases were old and obsolete. The departmental nature of the factories meant a lack of a commercial approach to production. The research and development (R&D) section of these factories, for example, was heavily bureaucratized, with much of the money being spent on temporary tasks. The supply system assured by the armed forces through the “indentation system”, regardless of quality, cost and time, has made “innovation and its diffusion” a redundant exercise. Complacency had set in and there were hardly any factories that lived up to the expectations of the armed forces.
But were these factories the only ones to blame? Maybe not. Even the most sincere general managers have often found themselves helpless in the face of the orders and demands of OFB which used to decide everything! Within the factory, they had to deal with many stakeholders such as representatives of the General Directorate of Quality Assurance (DGQA), audit, finance, or even security (made up of former military). In most cases, these actors were obstructions rather than facilitators of production goals. Factories have also been subjected to the recurring whims and fancies of unions impeding corporate work ethics on the premises. The poor general managers did not even have the power to suspend a junior works manager (JWM), a lower level employee, since even that power was snatched away by Ayudh Bhawan for himself!
The OFB and its constituent units therefore suffered from continuous organic degradation in due course. The country’s various groups of military equipment factories that were once supposed to proliferate ancillary industries around them have failed miserably in their efforts. The opening up of the defense sector to private enterprise as well as the continued liberalization of FDI standards meant that the OFB was no longer assured of the age-old indentation system and had to compete in the new environment. With high production costs in almost all cases, the OFB-run munitions factories were simply not in a competitive position and needed to be phased out ASAP! Corporatization was a timely drug to bring new life into it and another opportunity to get in a competitive mood. More importantly, it gives the new defense power supplies more functional autonomy, which OFB was not willing to give up in the past!
The OFB may be dead, but its ghost will haunt the new work environment for a long time. To give an example, these defense power supplies are run by the same former general managers who ran different factories until recently and were partly responsible for the poor performance in those individual factories. Many of them may find it difficult to adapt to the new work culture. It remains to be seen whether they would be able to develop the business thirst, competitive attitude and work ethic found in the corporate world. Probably, it would take a few years and a generational change in leadership in these PSUs for a significant impact of corporatization.
Despite the demise of the OFB and the disintegration of its old empire, economists and public policy experts should study the death process of the OFB in more detail. Did he die because it was a corporate enterprise that was not run on commercial principles? Did he die because he was too old fashioned to survive? Or did he die just because he couldn’t compete? Whatever the reasons, the OFB autopsy would provide valuable lessons for new defense PSUs if they are to survive.
Note: The author is from the Indian Defense Accounts Service. Opinions are personal.
The opinions expressed above are those of the author.
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