Ordnance factories – old wine in new bottles?

"Ordnance is the sole means of victory, and the difference between the good and the bad general is the judicious selection of these instruments, and their timely application." - George Washington

Every year 18^th of March is observed as Ordnance factory Day to commemorate the founding of the first Ordnance Factory in colonial India near Kolkata, in 1801. Till recently the 41 Indian Ordnance factories now converted into 7 Defence Public Sector Undertakings (DPSUs) were engaged in research, development, production, testing, marketing and logistics of a wide variety of weapons and equipment that could be used on land, air, or sea.

From parachutes to a wide range of guns, ammunition and small arms – the Ordnance factories also called the “Fourth Arm of Defence” in India used to produce and maintain bombs, rockets, missiles, military vehicles, and optical devices.  However, they were disbanded and converted into seven new defence PSUs on, October 1, 2022.  

Ordnance Factory Board (OFB) the parent body of the Indian Ordnance Factories, now known as the Directorate of Ordnance (Coordination & Services) came under the umbrella of the Department of Defence Production (DDP) in the Ministry of Defence (MoD).  It used to be the 37th-largest defence equipment manufacturer in the world, the 2nd-largest in Asia, and the largest in India.

The OFB also called the “Force behind the Armed Forces” was the world’s largest government-operated production entity and the oldest establishment in India with a workforce of about 80,000 personnel.

Ordnance factories – products 

The Ordnance factories used to manufacture a wide range of defence products and equipment to meet the requirements of the Indian Armed Forces. These included:

• Small Arms – a variety of small arms such as rifles, pistols, revolvers, and machine guns.
• Ammunition – such as bullets, shells, cartridges, and bombs.
• Artillery – guns, howitzers, and rocket launchers.
• Vehicles – tanks, recovery vehicles, armoured personnel carriers, VIP Jonga, LPTA 715, Bullet Proof Vehicle, Mine Protective Vehicle, 5 KL Water Bowser, Kitchen Container, Stallion Mark-4, Stallion Mark-3 (Left Hand Drive), and Battery Command Post Stallion  
• Explosives – such as TNT, RDX, and HMX.
• Engineering Equipment – such as bridges, pontoons, and field hospitals.
• Clothing and Accessories – such as uniforms, boots, and helmets.

The Ordnance factories also used to manufacture a wide range of simulators, small arms, missiles, rockets, bombs, grenades, military vehicles, armoured vehicles, chemicals, optical devices, parachutes, mortars, artillery pieces plus all associated ammunition, propellants, explosives and fuses to meet the requirements of the Indian Armed Forces.

Also Read: Corporatization of the Ordnance factories – facts behind and the facade

Ordnance factories – history   

The Merriam-Webster dictionary defines ordnance as military supplies including weapons, ammunition, combat vehicles, and maintenance tools and equipment. It also means a service charged with procuring, distributing, and safekeeping of ordnance. Alternatively, it is also supposed to mean artillery, cannon, guns and ammunition.

As Frederick, the Great once said, “Ordnance and artillery are the sinews of war.”

The history of ordnance factories in India dates back to the East India Company which established a gunpowder factory in Ichapore in West Bengal. It was the first-ever defence production unit in India and began production in 1791. Soon the East India Company established the Board of Ordnance at Fort William, Kolkata in 1775. This was the beginning of the British army’s ordnance in the country.

However, the formal establishment of ordnance factories in India took place in 1801 when the British set up the Cossipore Gun and Shell Factory in Kolkata. The main role of Ordnance factories at that time was to produce small arms, ammunition, and other equipment required by the British East India Company.

During the World Wars Ordnance factories played a big role in meeting the increased requirements for weapons and ammunition and supporting the British and Allied war effort. In World War I the Indian Ordnance Factories (IOFs) supplied all kinds of arms and ammunition to the British army, including .303 rifles, machine guns, and artillery ammunition. They also produced much-needed clothing, boots, and other equipment for soldiers on the front lines. Once again during World War II, the IOFs supplied .303 rifles, machine guns, and anti-aircraft guns to the British Army. They also produced tanks, such as the Vickers light tank and the Sherman tank, and artillery pieces, including the 25-pounder gun-howitzer. The IOFs also manufactured a range of binoculars, field telephones, and military vehicles.

The factories were also a significant source of employment in India, providing jobs for thousands of workers during the war years.

At the time of independence in 1947, India had 18 ordnance factories which were taken over by the Government of India. Over the years, the ordnance factories underwent significant changes and new factories have been established to meet the growing defence requirements of the country.

Ordnance factories – role in nation building 

The ordnance factories were the backbone of India’s military and provided weapons, ammunition, equipment, apparatuses, clothing and other security-related items to the armed forces at the time of need in every civil disturbance, skirmish, battle and war. From 5.56 mm INSAS rifle to 155 mm x 45 calibres ‘Dhanush’ artillery gun system – the Indian Ordnance Factories were the only organization in the world to produce both the weapon and ammunition as well as the special steel, chemicals and explosives.

The Indian Ordnance Factories are the largest suppliers of bulletproof jackets, guns, mortars, rockets, and grenades, as well as bulletproof and mine-protected vehicles for the Indian army.

The IOFs have played a vital role in providing weapons and ammunition to the Indian Armed Forces and securing India’s victory in various wars and conflicts.

During the 1947-48 war with Pakistan, the Indian Ordnance factories worked overnight to produce the much-needed weapons and ammunition for a wide range of rifles, machine guns, and artillery guns to help the Indian Army to fight the invading Pakistani forces.

In the 1962 War with China, the Indian Ordnance factories were involved in the production of ammunition and artillery pieces.  

During the 1965 and 1971 Indo-Pak wars the Indian Ordnance factories produced a wide range of weapons and ammunition, including rifles, machine guns, grenades, and artillery guns used by the Indian Army to fight the Pakistani forces. The IOF’s contribution was critical in securing India’s victory in the 1971 war, which led to the creation of Bangladesh.

In 1999 during the Kargil war, the IOFs supplied a range of weapons and ammunition, including rifles, machine guns, and artillery guns to the Indian Army. The factories also produced specialized equipment such as bulletproof jackets, helmets, and mine detectors, which were used by the Indian Army during the war.

“Indian Ordnance Factories, which could produce ammunition and certain underlying equipment for which they had the necessary technology, rose to the occasion. Nonetheless, we confronted considerable problems in procuring items which had to be imported at a notice,” former COAS Gen VP Malik said while commenting on the role played by the Indian Ordnance.

The Ordnance factories not only supplied weapons and equipment to help the Indian Armed Forces fight wars but also played a big role in nation-building. Some of the achievements of ordnance factory boards include:

• Ushered the Industrial Revolution in India
• The first modern steel, aluminium, and copper plants in India
• first modern electric textile mill in India,
• first chemical industries of India
• established the first engineering colleges in India
• sparked India’s first war of independence in 1857 with its rifles and bullets
• Accelerated the founding of research and industrial organisations like ISRO, DRDO, BDL, BEL, BEML, SAIL, etc.

Ordnance factories – what went wrong?

Over the past many years, the ordnance factories had started operating as bureaucratic outfits. They were managed by civil servants belonging to the Indian ordnance factories Service (IOFS) rather than by professionally trained managers.

The Indian Armed Forces which were invariably their favourite or sole buyer often complained that the products were extremely expensive and alleged that the Ordnance factories were not innovative and slow to adopt new technologies in the market.

A recurring problem related to the Ordnance factories was delayed deliveries. For instance, the Army placed an order for 114 Dhanush self-propelled ‘Desi Bofors’ artillery guns in 2018. Each gun has the capacity to fire 42 rounds in an hour and depending on the need of the situation three to six guns can be fired simultaneously at a single target. Hence the timely delivery of these guns would have allowed the army to raise 6-7 artillery regiments. The Ordnance factories delivered 6 guns costing about Rs 14.5 crore a piece in April 2019 and delivered only 12 guns over the next few years – not enough to raise even a single artillery regiment (18 guns).

Another area of concern was the cost. The Ordnance factories were not allowed to make profits and had to be compensated by the Government or MoD for producing weapons and equipment for the Indian Armed Forces. This financial burden was eventually borne by Indian taxpayers.

This also meant that the Ordnance factories had no incentive to control costs and the Armed Forces had to pay whatever the OFB demanded (including the lavish perks the IOFS civil servants rewarded themselves with). As a result, the Armed Forces complained that the OFB’s products were far costlier than similar products from private manufacturers in other countries.

Hence the Ordnance factories continued to enjoy the reward for their incompetence by charging unreasonably high prices for delayed deliveries of technologically inferior and outdated products.

Ordnance factories – arguments in favour of Corporatization

The TKS Nair Committee (2000), Vijay Kelkar Committee (2005), and Vice Admiral Raman Puri Committee (2015) — suggested the corporatization of the OFB.  

The TKS Nair Committee report in 2001, made several recommendations to improve the efficiency and effectiveness of the Ordnance Factories starting with improvement in the management of the Ordnance Factories. The committee suggested the establishment of a separate management cadre for these factories and the adoption of modern management practices to increase productivity and reduce costs. The committee also emphasized the need for greater collaboration between the Ordnance factories and Armed Forces, to ensure that the equipment produced met the specific requirements of the Armed Forces.  

Almost five years later the Vijay Kelkar Committee appointed to review the functioning of the Ordnance factories in India in 2005 suggested measures for their modernization and restructuring. The committee report in 2006, made several recommendations to improve the efficiency and effectiveness of the Ordnance Factories including outsourcing of non-core activities and the adoption of performance-based incentive schemes.

The committee headed by Vijay Kelkar an Indian economist and academic emphasized the need to improve the quality of the products and suggested the establishment of a Quality Assurance Directorate to monitor and enforce quality standards. The committee also recommended the establishment of a separate research and development organization to promote a culture of innovation and R&D,

The committee also recommended the formation of a separate entity to promote exports and reduce the dependence on domestic orders in addition to the establishment of a new organization called the Defence Production Corporation – as a holding company for the Ordnance factories and other defence production units.

In due course the Vice Admiral Raman Puri Committee 2015 review made several recommendations to improve the efficiency and effectiveness of the Ordnance Factories. Some of its key recommendations included the adoption of modern management practices, performance-based incentives and outsourcing of non-core activities. The committee emphasized the need to improve the quality of the products produced by the Ordnance factories and suggested the establishment of a Quality Assurance Directorate to monitor and enforce quality standards. The Committee headed by Vice Admiral Raman Puri who retired as the Chief of Integrated Service Command (CISC) and a founder Director of the College of Naval Warfare, emphasized the need for reforms in the functioning of the ordnance factories, as well as improve their efficiency and effectiveness in meeting the needs of the Armed Forces.

In due course, a fourth committee headed by Gen DB Shekatkar in 2016 suggested regular scrutiny of the 220-year-old Ordnance factories and corrective measures to improve their performance. While the primary focus of the committee was on the Indian Army, the Shekatkar Committee recommended modernization and restructuring of the Ordnance factories in India.

Soon a Comptroller and Auditor General of India (CAG) report pointed out several deficiencies in the functioning of the Ordnance Factories, including delays in production, poor quality control, and inadequate investment in modernization and upgradation.

The CAG reports suggested a number of ways to reduce delays in the production of weapons and equipment as well as the modernization of the Indian Armed Forces. Pointing out several instances of poor quality control the CAG reports noted that the Ordnance factories have not invested adequately in the modernization and upgradation of their facilities and equipment, leading to inefficiencies and poor quality control. The CAG reports also highlighted shortages of critical equipment and raw materials, leading to delays in production and inefficiencies in the functioning of the Ordnance Factories.

Ordnance factories – new beginning or the end

Shortly after the 2019 Lok Sabha election, the government of India decided to disband the OFB. The Union Cabinet endorsed the decision on 16^th June 2021. The whole exercise was aimed to improve accountability, efficiency and competitiveness.

Finally, the Ordnance Factory Board was abolished on 1^st October 2021, and the management, control, operations, and maintenance of the Ordnance factories and personnel was handed over to the seven newly constituted defence PSUs including Munitions India Limited (MILHQ), Armoured Vehicles Nigam Limited (AVNLHQ), Advanced Weapons and Equipment India Limited (AWEILHQ), Troop Comforts Limited (TCLHQ), Yantra India Limited (YILHQ), India Optel Limited (IOLHQ), and Gliders India Limited (GILHQ).

Defence production in India – the future  

The disbandment of OFB and the corporatization of its production facilities was a watershed moment in the history of Indian defence production. Now the question is — what next? Would this alone dry-clean the market for military equipment and give the Indian Armed Forces a wider choice of equipment and suppliers? Would this open the market for the private players and at the same time provide timely delivery of technologically superior products at lower prices to the Armed Forces?

As the market opens up, there are still many pitfalls that we still need to avoid. For instance, the newly formed defence PSUs are no holy cow. They too will have to exist and survive in the same market as well as face competition from their private counterparts. What is the surety that they wouldn’t fail?

In the long run, the Government’s efforts to promote the defence PSUs by denying access to alternative suppliers will destabilize India’s defensive capabilities. Eventually, this may do more harm than good. What’s good for defence PSUs (the suppliers) will probably be bad for the Indian Armed Forces (the customers), and vice versa.

The major gainers from this development are the private defence equipment companies. The foreign suppliers catering to the needs of the Indian Armed Forces will probably lose some of their markets in the near future. Many of them with access to advanced technology may partner with Indian companies to retain their edge in the market. However, the major losers will be the employees of the erstwhile OFB (newly formed PSUs), who will lose the privileges that the Ordnance factories allowed.

Will Indian companies develop their own products or will they be happy to tag along as licensed manufacturers of technologies owned by foreign companies? The issue is – can India produce companies like Lockheed Martin, BAE Systems, Raytheon or Northrup Grumman?