Self-reliance in defense has been the cornerstone of India’s defense production policy. The recent call for Atmanirbhar Bharat, or Self-Reliant India, by our government has provided further impetus to realize this goal. The Indian defense industry, primarily catering to the needs of the armed forces, has evolved with a diversified product mix and market. Propelled by the recent successes in exports, India is set to realize its potential as an emerging defense manufacturing hub. We aim to make India one of the top countries in the world for the defense sector, from design to production with enhanced reach to market, including exports through the active participation of the public and private sectors.
Since 2014, the government of India has brought many reforms to the defense sector to create a conducive ecosystem for exports, for foreign direct investments and to provide stimulus for the demand of indigenous products. The historic decision to convert the Ordnance Factory Board, or OFB — a subordinate office of the Ministry of Defence — into seven new, 100 percent government-owned corporate entities to enhance functional autonomy and efficiency, as well as unleash new growth potential and innovation, is arguably touted as one of the biggest in this series.
Ordnance factories have a glorious history of more than 200 years. Their contribution to national security has been immense. Their infrastructure and skilled manpower is an important and strategic asset for the country. However, over the last few decades, concerns have been raised by the armed forces relating to high costs of OFB products, inconsistent quality and delays in supply.
There were various shortcomings in the existing system of OFB. OFB had the legacy of producing everything within the ordnance factories, resulting in an inefficient supply chain and lack of incentive to become competitive and explore new opportunities in the market. There was a lack of specialization, with OFB engaged in production of a wide range of items under one umbrella.
This decision to create seven new corporate entities is in line with the evolution in models of business governance. The new structure would provide these companies incentive to become competitive and transform the ordnance factories into productive and profitable assets through optimal utilization; deepen specialization in the product range; enhance competitiveness while improving quality and cost efficiency; and usher in a new age of innovation and design thinking.
While implementing this decision, the government has assured that the interests of the employees are protected.
The seven new companies have now been incorporated and have also commenced their business. Munitions India Limited, which would be mainly engaged in the production of ammunition of various caliber and explosives, has huge potential to grow exponentially — not only by way of “Make in India” but also by “Making for the World.”
Armored Vehicles company Avani would mainly engage in the production of combat vehicles such as tanks and mine-protected vehicles. It is now expected to increase its share in the domestic market through better capacity utilization, and it can also explore new export markets.
Advanced Weapons and Equipment India Limited, which would be mainly engaged in the production of guns and other weapon systems, is expected to increase its share in the domestic market through meeting domestic demand as well as product diversification.
As would be the case with the other four companies.
The government has also assured most of these new companies have sufficient workload; all the pending orders with OFB have been converted into contracts worth more than $9 billion.
Moreover, through diversification and exports, the new companies have huge potential to grow, including in dual-use items and through import substitution.
A new beginning has been made. While the ordnance factories were earlier mandated to just cater to the needs of the armed forces, the new companies now would look beyond that mandate and explore new opportunities, both in India and abroad. The greater functional and financial autonomy would allow these new companies to look for modern business models and newer collaborations.
We are currently focusing on multiple thrust areas to provide a focused, structured and significant thrust to the defense production capabilities of the country for self-reliance and exports. It is envisaged that these new companies, along with the existing public sector companies, would work hand in hand with the private sector to build a strong military-industrial ecosystem in the country. This would help us minimize imports by planning for indigenous capability development well ahead of time, and divert resources for indigenous procurement. If successful, our economy will attract investments and generate new employment opportunities.
There are various challenges ahead. It is difficult to change the age-old traditions and working culture overnight.
I understand that this is a beginning of a very complex transformation process, and our ministry would provide all the support in resolving teething issues and in guiding and converting these newly formed companies into viable business entities. I am confident that the employees and the management of the new companies will sow the seeds for a newly organized culture so that their businesses are transformed and revitalized.
Rajnath Singh is India’s defense minister.