Carved Out of OFB, 6 Defence Companies Register Initial Profits

In six months of having been formed, companies carved out of the mammoth Ordnance Factory Board (OFB) last October, are showing profits, the Ministry of Defence said. They have begun reversing their trend of losses. These companies have been able to secure domestic contracts and export orders valuing more than Rs 3,000 crore and Rs 600 crore, respectively in the initial six months of their business — October 1, 2021, to March 31, 2022. This is an achievement for India's defence manufacturing sector.

The 41 factories, assets, employees, and management of the OFB, after it was dissolved last year, were transferred to the seven new 100% government-owned companies, which are now supposed to be the main suppliers of arms, ammunition, and clothing to the 15-lakh strong armed forces. The profits posted by the six new entities are not significant, ranging as they do from Rs 1 crore to Rs 60 crore for the October-March period, but come in the backdrop of their average six-monthly losses being Rs 6 crore to Rs 677 crore over the last three years.

Except Yantra India Limited (YIL), all other six companies - Munitions India Limited (MIL); Armoured Vehicles Nigam Limited (AVANI); Advanced Weapons and Equipment India Limited (AWE India); Troop Comforts Limited (TCL); India Optel Limited (IOL) and Gliders India Limited (GIL) reported provisional profits during October 1 last year to March 31 this year. Even YIL, which was in the red, cut its losses by two-thirds. Munitions India Limited has bagged the biggest ever export order of ammunition of Rs 500 crore.

“With the functional and financial autonomy provided to these new corporate entities, coupled with the government’s handholding and support to them in starting their business, a turnaround has been brought in the functioning of the ordnance factories,” an MoD official said.

Taking note of this “heartening” development, defence minister Rajnath Singh said, “These companies are scaling new heights and contributing to India’s defence manufacturing.”

It is heartening to note that 6 out of the 7 new defence companies, have reported provisional profits during the initial six months of their business growth.

These companies are scaling new heights and contributing to India’s defence manufacturing.https://t.co/nyMq2FksQY

— Rajnath Singh (@rajnathsingh) April 29, 2022

The Numbers Game

According to the MoD data, the profit-making entities were

India Optel Ltd (Rs 60 crore)

Armoured Vehicles Nigam Ltd (Rs 33 crore)

Munitions India Ltd (Rs 28 crore)

Troop Comforts Ltd (Rs 26 crore)

Advanced Weapons and Equipment India Ltd (Rs 4.8 crore)

Gliders India Ltd (Rs 1.3 crore).

The seventh, Yantra India Ltd, in turn, cut its losses from Rs 348 crore to Rs 111 crore.

Why This Achievement Matters

In July 2020, the Cabinet Committee on Security approved the corporatization of the OFB, despite the organization's protests. Less than a year later, the cabinet cleared the restructuring of the OFB into seven separate corporate entities on the lines of the nine existing defence public sector undertakings in the country. Under this plan, the 41 units functional under the OFB were subsumed under one or the other of the seven new companies.

The new companies initiated various measures toward optimal utilization of their resources and cost reduction, which led to them achieving a turnover of more than Rs 8,400 crore. With focused attention on cost reduction, these companies have been able to make cumulative savings of 9.48 percent in areas such as overtime and non-production activities during the initial six months itself. These companies are also taking measures for developing new products through in-house as well as collaborative efforts. YIL has bagged orders of about Rs 251 crore from Indian Railways for Axles.