WHAT'S HOT? –– ANALYSIS OF RECENT HAPPENINGS

INDIA'S $3 BILLION ORDNANCE FACTORY BOARD (OFB) 
IS UNDER SIEGE

An IDC Report From DEFEXPO 2002

New Delhi, 24 February 2002

DEFEXPO 2002 will go down in India’s Defence history of Supplies and Logistics. For the first time the Indian Army asked the right questions on how it gets its needs from DRDO and the Ordnance Factory Board (OFB) at captive prices and how it needs to modernise. The Naval experience was being quoted by the Industry. It is hoped there will be a revolution for the better, because Indian Industry will begin to get a bigger share of the huge defence pie. Earlier and legally the Indian Industry was not permitted to supply equipment to the Indian Army, but after the 2 Jan 2002 notification permitting 100% private participation, there is going to be a sea change. The Navy had circumvented the rules by making the three Defence Shipyards the buyers and only bought ammunition from the OFB.

If the Chief Justice of India could say that 20% of the Judiciary are corrupt, then the fact that the Ordnance branch of the Army cannot be whistle clean also surfaced. The Ordnance Factory Board of India has been the prime supplier to the Army since inception, known for many years as the fourth arm of India’s Defence and has enjoyed monopoly and a captive docile customer, which is so huge that even if it complains it takes time to be heard.

It is a civil government organisation under the Ministry of Defence, Department of Production and Supplies, which means it is IAS controlled. It has been the life stay of ammunition and other supplies to the Indian Army and to a lesser degree to the Navy and Air Force, which consciously broke away slowly.

However with the changing times of RMA, the OFB is under siege as the Army is now demanding better service and world quality ammunition and fuses and reliable products at reasonable costs. Having acquired the latest 155mm Bofors, FH77 Howitzers, SAM Missiles, T 90 tanks, Polish and Slovak ARVs, latest Russian SAM systems like Tanguska and OSA M, Israeli UAVs, Russian GRAD Multi-barreled rocket launchers and under barreled grenade launchers and sophisticated radars and communication sets, which need to be supported at a time when continued imports are frowned upon, it is a challenge to keep operational. There have also been scandals like Tehelka and the CAG report mainly for the Army, which have slowed imports and the huge Indian Army is mired in procedures. The Navy got involved with DRDO labs and shipyards while the IAF imported merrily as life and limb was involved.

The Army’s has suddenly realised its efficacy is no longer dependant on its manpower alone which is of world class; though it still keeps asking for more manpower in Kashmir –– 28 Rashtriya Rifle battalions. The task of reliable logistics and induction of technology has become a challenge and the Army displayed its unhappiness during the Kargil War when massive imports of ammunition and supplies had to be resorted to from South Africa, Russia and Israel especially for the 155 mm gun.

The situation was scary had the war escalated. This was amply confirmed at DEFEXPO 2002 and earlier at the Factory Managers Meeting held in New Delhi on 1 December 2001, to celebrate 200 years of OFB’s existence just a day after a major accident in the Itarsi factory rocked the Nitrogen filling room and killed three workers . Some mine accidents had recently killed some 30 Jawans during mobilisation but the Defence Minister ruled out sub standard munitions. Yet the Defence Minister George Fernandes himself stated India was in the third rung of defence equipment producers with a mere $20 million of exports mainly to captive customers, and the Minister of State responsible for supplies and production Hiran Pathak gave a wake up call to the OFB. He said, if the factories are to survive they have to modernize, carry out R & D and collaborations and warned of privatisation, which is now a fact of life, as could be discerned by all statements at DEFEXPO 2002. The house of TATAs, Larsen and Tubro and Mahindras with Kirloskars and Ashok Leyland and some 20 smaller players are ready to invest in Defence orders and one is even ready to make tanks and submarines in collaboration with the South Africans and Russians.

The OFB has 39 factories haphazardly spread all over the country, which were built in socialist India to produce defence wares but mainly to provide employment. The OFB traditionally controlled from Kolkutta under the Chairman & Dir General Ordnance Factories (DGOF) whose officers have to spend considerable time commuting in and out of New Delhi, where the MOD calls meetings. Mr Dutta the current CMD, a civilian officer has to coordinate with the Master General of Ordnance, Lt Gen J S Saighal and DG Ordnance Supplies Lt.Gen. Vijay Lall due to retire soon.

Some of the factories like the Parachute factory at Chandigarh, the Grey Iron and Ordnance Factory at Medak, Heavy Vehicle and Engine Factories at Avadi, Ammunition Factory at Bolangir –– are modern and some are very ancient, occupying expensive real estate. The OFB’s history dates back to 1802 when the first gun factory was established in Calcutta by the East India Company on the left bank of the river Hooghly at Cossipore, now a Gun and Shell Factory that tries to sell 3 kg .22 sporting rifles at $350 dollars a piece!. Since Independence, based on the objectives of socialism, self-reliance and non-alignment these factories increased their product profile both in range and depth but not necessarily in quality. Most older factories are today at crossroads which can only be upgraded with massive investments or will have to be closed down like the vehicle factories which are without orders since civil industry and firms like Mahindra’s, TATAs, LEYLAND, MARUTI and BEML TATRA a PSU are meeting the Army’s requirements more economically.

Some are even willing to buy OFB plants outright while DRDO plans to open up the labs to the private sector for viewing. Some notable products, a few of which in the long untenable list will need weeding or upgrading –– include the 105 mm field guns with Vickers collaboration, L70 anti-aircraft guns, mortars, various small arms and FSAPDS ammunition for 155 mm guns, rockets, projectiles, pyro-technics, bombs, grenades, mines, demolition charges, depth charges, BMP2, infantry combat vehicles, Arjun and T-72 battle tanks, Nissan petrol vehicles, high altitude and combat clothing, optical and fire control instruments, floating bridges, leather items, parachutes, assault boats, sporting arms and ammunition, civil blasting explosives, engineering equipment and a variety of knitted and woven items, supply dropping equipment and general stores.

Beside these, the factories also manufacture and supply hardware to the Railways, Public Sector Undertakings and explosives and accessories for indenters such as a the Coal Industry. They also supply to Police authorities, Border Security and Para Military Forces their requirement of arms, ammunition, vehicles, clothing items etc., but these agencies are looking at other sources.

OFB’s propellant technology has been good, but for the last ten years there has been no serious introspection on their costs and Parkinson’s Law of employment has taken a heavy toll on the OFB which now has a strength of 170,000. During the meeting on “Perspective Plans of Ordnance Factories”, the proposals suggested in this article, were presented by world class Consultants appointed by the OFB but the findings have been kept under wraps. An investment of Rs 3027 crores has been projected for procurement of the state-of-the-art plant and machinery commensurate with the technological needs of futuristic products during the Tenth Plan Period (2002-2007). This is under debate and other alternates now that FDI is possible need investigation.

Thanks to the Kargil war and the need to update the War Wastage Reserves (WWR) the Ordnance factories registered a growth of 82.5 per cent during the last two years. The turnover was US$2.1 billion during 2000-2001 and is expected to be $2.3 billion during the current financial year 2001-2002. However the orders will then begin to drop as the Army has decided to import and give the civilian industry a chance to quote and there lies the challenge of the future to get the maximum bang for the buck. The Army pays without questioning the costs, as the money transfers are mere book transactions within the Ministry and bureaucrats who control this tend to cover up for each other.

Another debility is the presence of the DRDO as a go-between. While the major requirements of design and development for any new product are the responsibility of DRDO, the Ordnance Factories (IOFs) also carry out product and process improvement through in-house R&D which has been ineffective. In addition, Transfer of Technology (TOT) from abroad is another method of production but so far Russia and now Israel, South Africa and Italy have been the main partners.

At DEFEXPO 2002 it was evident that other nations too want the chances and South Africa was vocal with their articulate Defence Minister. Some important new items, which are being taken up for production, include 155 mm ammunition of longer range (TOT) and illuminating shells from NASCHEM of South Africa at Nalanda, 125 mm Fin stabilized armour piercing ammunition with long penetrators (DRDO), up-gunning 180 M46 130 mm Artillery Guns to 155 mm at Jabalpur, with kits provided by SOLTAM of Israel.(TOT), and 300 to be made indigenously, Automatic 30mm Grenade launching system (TOT), 12.7mm Air Defence Guns for the Coast Guard, Main Battle Tank Arjun (DRDO) from Avadi , T-90S Tank (TOT) from Uralzavod, Russia and Mine Proof Vehicles at the Medak factory. In fact the Jharkand State and Hyderabad police have purchased five armoured vehicles and the Army has asked to evaluate the rugged versions and OFB claims they are superior to the second hand Cassapirs provided by OMC Vickers of South Africa whose engines TATA will make. SIMMEL DIFESA of Italy that supplies the Otto Melera 76 mm gun to the Navy through BHEL is to collaborate and produce 40mm PFFC (Proximity Fuze Fragmented Cubes).

DEFEXPO saw a churning in India’s defence sector and it is creditable that 38 OFB factories have obtained ISO9000/9002 standards and most observers believe that if these are run on better commercial lines and their real estate better utilized, their output could improve substantially and even lethal equipment could become competitive for exports. Shop floor culture needs improving. Day and Zimmerman USA have supplied the Ordnance factory at Bolangir in Orissa and now Shell filling of 155 mm for FH77 B Shells for the Bofors have been satisfactorily supplied and used in the Kargil war.

A modern factory for bi-modular propellant ammunition is being set up at Nalanda in Bihar in Defence Minister George Fernandes’s constituency with help from ARMSCOR of South Africa, which along with Israel supplied ammunition including 3600 T-72 tank rounds during the Kargil war. The factory at Medak has produced a 30mm gun for the Coast Guard, which is not sophisticated but has proved its worth. The problems that have beset the OFB have been quality control, which is critical for a large Armed Force. Though there is an Inter-service Organisation the DGQA headed by Lt. Gen Chary which inspects and extends assurance coverage in respect of all stores acquired by the Army and Navy (excluding Naval Armament which is done by the Navy through the NAIO) and common user items by the Air Force, it has not been able to execute the coordination well or involve the Army despite facilities.

The Navy broke away from OFB in the 70’s when shoddy shoes and uniforms were being supplied. It also formed a Warship Production Agency for Naval stores for Dockyards and Shipyards and the Navy only purchases $25 million of equipment from the OFB. The IAF procures $100 million and has its own set up for aviation stores and spares.

The Army procedures are cumbersome and though they paid the Ordnance factories in 2000-2001 heavily, there were complaints on quality. The INSAS-5. 56 mm gun costs over $300 dollars to the Army, whilst a lighter and superior AK 47 costs one-third in the market. The blame is now being put back on the Army, which gave the DRDO strict QRs for a singe shot long-range capability, with short range LMG features also, and a mixed bag weapon has arrived on the scene. The cost of equipping the large Army, Navy, Air Force and Para Military forces is huge and tempting for the OFB. Coordination with DRDO has also proved to be challenging.

The Arjun Tanks and T-72 upgrades produced at the Combined Engine and Heavy Vehicle factory at Avadi are a glaring example, and India’s ambitions for an MBT were derailed, because of poor coordination and manipulations by foreign suppliers. The Renk torsion bar transmission was meshed with the under powered 1000 bhp MTU engine in a hurry, the Diehl tracks were meant for a lower weighted tank so it failed tests and finally the Delft fire control system was denied by sanctions as USA put clamps and Sagem joined hands, while Rexnoth of Germany provided the hydraulics for the 120mm gun that Midhani produces for machining . Now Warstila wants to offer the more powerful Le Clerc engine since it has made inroads into the Navy for the Krivack diesels and the Type 17 propulsion Deisels.

In the ultimate analysis a fine OFB organization is still able to deliver but it is under siege. If its homework is correct it can still deliver with collaborations and India’s OFB will still be the fourth arm of India’s defence.

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