Big Bang Reforms: I Fail to Clap for Finance Minister or for OFB
A deeper analysis is required for transforming OFB.
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The first big news flash on 16 May was Finance Minister Nirmala Sitharaman approving the corporatisation of Ordnance Factory Board (OFB) to help improve its autonomy, efficiency, and accountability. At the same time, she announced that the government would consider listing the entity. The second news flash was the raising of the foreign direct investment (FDI) cap in the defence sector under the automatic route from 49 percent to 74 percent.
More than two centuries old, OFB is the key to make India a defence manufacturing hub. Is corporatisation the only solution?
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The Study of Symptoms
The present ills of OFB primarily arise from culture – risk aversion, non-business style, and multiplicity of objectives. Further, there’s dependence of organisations like the Controller General of Defence Accounts (CGDA) and the Directorate General Quality Assurance (DGQA), which have no stake in the performance of OFB. They lack management skills, leadership, and vision.
The Study of Solutions
Will corporatisation help? The answer does not lie in a structural solution like corporatisation. Structure is a small part in the transformation. Strategy, culture, and process are more important than structure.
If the same culture and process remain without any change of strategy, corporatisation will kill OFB even faster. And that will be a big loss to the nation. The exit of a long-standing player will migrate the market towards oligopoly, even to monopoly to the extent of dependence on players from abroad, defeating the very objective of self-reliance.
The Questionable Objectives
Why will any prudent owner like to go public by offering its stock cheap when the stock market is down? The public has enough options to buy from many PSU shares. Logic that the public will be able to buy OFB share sans any logic.
It is not understood in what way OFB has failed in transparency and accountability in a democratic system with checks and balances from RTI, audit, executive overview, and finally parliamentary scrutiny. If all of them are not working, the government should try to reform their system rather than making OFB a scapegoat.
The real cause of failure of India’s PSUs is the ministerial oversight, where there is a chasm between the accountability and the responsibility of the ministry. The need of the hour is reform of the ministry. If efficiency and effectiveness of decision making suffers at higher level, larger canvas is affected.
The Tragedy of Errors
It is unfortunate that no formal study of a rigour has been done to understand from a manufacturing perspective how a top-class manufacturing organisation should be run.
A deeper analysis is required for transforming OFB. The finance minister should not shy away from privatisation, if it is required. She should not shy away from closing the Department of Defence Production, one of the partners, for failure of OFB.
For now, I am awaiting to clap for good things to happen.
(Dilip Vishwanath Gondnale is a former Senior Deputy Director General, Ordnance Factory Board, Kolkata. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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