Ordnance Factory workers end strike, MoD to review “corporatisation”

OFB officers wonder how "corporatisation" will more than double the turnover of ordnance factories

By Ajai Shukla

Business Standard, 25th Aug 19

Ordnance Factory Board (OFB) workers’ unions have called off a strike, launched on August 20, to protest against the Ministry of Defence’s (MoD’s) decision to “corporatize” the 41 ordnance factories. The unions have asked OFB employees to re-join work on Monday.

“Corporatising” the OFB involves converting what is currently a department of the MoD that produces tanks, guns and ammunition, into a defence public sector undertaking (DPSU). That would require the OFB to maintain a balance sheet and a profit and loss account, with transparency about inputs, production costs and salaries.

The MoD believes that corporatizing the OFB will increase annual turnover from the current Rs 14,000-16,000 crore to above Rs 30,000 crore by 2025. The unions counter that turnover is not in their hands, since it depends wholly upon the orders placed by the army.

Consequently, some 60,000 of the OFB’s 76,000 workers struck work since August 20, in accordance with a strike notice issued on August 1. The OFB’s 1,500 Class “A” officers continued attending office, while about 6,000 “junior works managers” were not a part of the strike, but did not come to work.

The decision to call off the strike follows several rounds of meetings between the unions and the government, represented by the Secretary of Defence Production (Secretary DP) Ajay Kumar. A breakthrough was achieved on Friday, when the government agreed to review the question of corporatization.

On Saturday, a circular issued by the employees’ unions stated: “After considering the statement/assurance of the Secretary DP that no final decision has been taken yet about converting the OFB into a corporation and that a high level official committee will be constituted by the government… employees will resume work from 6 a.m. of 26/08/2019.”

Business Standard has reviewed the minutes of the MoD’s Friday meeting with the unions, in which the government assured the unions that “the matter regarding corporatization of OFB is under examination… [and] that no final decision has been taken by the government in this regard. It was therefore agreed to recommend setting up of a High Level Official Committee (sic) to interact with the Federations and make suitable recommendations to the government.”

OFB employees worry that corporatisation could trigger mass layoffs or salary cuts. There are also concerns about what pensions they would be paid, with all post-2004 employees covered under the New Pension Scheme.

Addressing the OFB employees’ key concerns, the MoD minutes stated: “The meeting recognized some of the concerned raised by employees federations regarding how the benefits/interests of employees in terms of wages, health facilities and other service matters etc. may be affected by converting OFB into a public sector entity.

OFB union sources point out that they conducted themselves responsibly. To prevent damage to tooling and inventories during the planned month-long strike, workers grease-packed equipment and machinery. Several thousand employees involved in essential services like electricity and water supply and fire fighting, were allowed by the unions to come to work.

While the OFB’s Class “A” officers were not part of the strike, they wrote a memorandum to the prime minister through their union, the Indian Ordnance Factories Service Officers’ Association (IOFSOA) on August 3. This pointed out that the OFB constituted a “war reserve” that could leverage surplus production capacities to quickly ramp up production in the event of war. Before the Kargil war began, OFs were producing ammunition worth Rs 700-800 crore annually. Faced with crisis, the OFB ramped up production to Rs 2,200 crore.

The PM was also told that ramping up production from the current Rs 14,000-15,000 crore to Rs 30,000-35,000 crore by 2024-25 would require large annual increases in the army’s budget, failing which it would be unable to absorb this enhanced production.

The IOFSOA letter to the PM also rebutted the notion that OFB products are overpriced. “OFB is highly competitive when compared with international prices. To quote a few: T-90 tank, AK-630M naval gun… OFB prices are less by 25-100% as compared to international prices. This is substantiated by international bidding in which OFB has participated,” it stated.

Multiple unions, including the Bharatiya Janata Party-affiliated Bharatiya Pratiraksha Mazdoor Sangh, represented the OFB employees. The others were the Left Front-affiliated All India Defence Employees’ Federation, and the Congress-affiliated Indian National Defence Workers’ Federation. They came together under the umbrella of the Confederation of Defence Registered Associations.