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The year 1775 marked the beginning of the First Anglo-Maratha War (1775–1782). This was the first of three Anglo-Maratha wars fought between the British East India Company and the Maratha Empire in India.It was in this year that the British forces established the first Army Ordnance Factory in India to manufacture military weapons, gain economic interest and strengthen their political power in India. They found it convenient and advantageous to manufacture their war waging requirements within the country rather than transport them from across the oceans. The fledging start to the establishment of a defence industrial base in India grew with time and peaked in the first half of the twentieth century, to sustain the forces in World War I and II. When India became independent, it had a well-established defence industrial base. This was given a fillip post-independence, with the establishment of a large number of ordnance factories working under the Ordnance Factory Board (OFB).
The Indian ordnance factories are an industrial set up engaged in production, testing, research, development and marketing of a comprehensive product range. The vast array of products include weapons, ammunition, explosives, propellants, chemicals, military vehicles and civilian arms and ammunition. They also manufacture support equipment, clothes, troop comfort and general stores among other items. As of now, the OFB has 41 factories, nine training institutes, three regional marketing centres and four regional controllerates of safety. The OFB operates under the Ministry of Defence and is one of the largest government-run industries in India.
Given such a set up, and the head-start the country had at the time of independence, it seems surprising that India is today the largest importer of weapons in the world, producing barely 30 percent of its defence requirements indigenously. For the last three decades, government policy pronouncements have repeatedly emphasised the need to reduce the country’s dependence on imports to a more reasonable 30 percent, and acquire indigenous capability to manufacture up to 70 per cent of the country’s defence needs. This has remained a chimera, despite the political leadership being cognizant of the requirements. Even the products manufactured by the OFB have serious shortcomings, the most glaring example being the manufacture of small arms. The Indian Armed Forces still are not equipped with a world-class rifle, something which even a small country like Singapore, has been able to manufacture. What then ails the OFB? And what needs to be done to revitalise the defence industrial base?
Organisationally, the OFB has no representation from the users, who remain a captive market. This perhaps remains a fundamental weakness as the users have no option but to purchase their requirements from the government controlled factories. Lack of competition breeds its own inefficiencies and results in poor quality and exorbitantly priced products. Similar products, of superior quality and lower cost can be made available from the private sector, but what would happen then to the large workforce already employed by the government? In 1991, with the ushering in of economic reforms, the nation saw an upward growth trajectory, which continues until date. However, in this heartwarming growth story, the contribution of the OFB has been miniscule. A vibrant defence sector could have added greatly to India’s economic success story, but a lot needs to be done to revitalise this sector. As a start, a performance audit of the OFB must be carried out. Many products manufactured by the OFB, are low-end technology items. Manufacturing capability in support equipment, clothes, troop comfort and general stores, currently the preserve of the OFB, can be better handled by the private sector, which has the capability and the capacity to provide superior quality items to the Services, at lower cost. Should the OFB choose to remain in these fields, it should be on a level playing field with the private sector, with the Services having the option to choose the vendor from whom to purchase its requirements. In any case, some of the requirements of the Services being provided by the OFB are in turn obtained by the defence factories from the private sector. Case studies of supply of the ALS vehicles to the forces would provide an apt example of how not to do business. A similar case study of purchase of the Tatra vehicle being provided by a Defence Public Sector Unit (DPSU) would prove interesting.
Even in the manufacture of small arms, ammunition, explosives and the like, the private sector needs to be co-opted into the system in a much larger way. This would revitalise the defence industrial base in the country and could further rejuvenate the economy. The mission of the Indian Ordnance Factory is “Production of state of the art battlefield equipment”, but through the years, due to lack of competition and an absence of performance audits, the ability of the OFB to deliver quality products at competitive prices has seriously eroded. The work force involved in the factories is extremely large, cost per worker is well above industry standards, and there is a lack of accountability in the system.
Perhaps the time has come to question the relevance of the OFB in view of the potential capability of the private sector to produce most of the requirements of the Armed Forces. The key focus of the OFB must shift to upper end technology items and to those items, which for security reasons, the government would prefer to exercise total control. Such control can be exercised over the private sector also, to ensure security requirements as is being done in many countries across the globe. However, the government may choose to keep specified items outside the purview of the private sector. Appropriate policies need to be framed to chart out a bold new course for the coming years, where the role of government would be advisory and providing broad guidelines rather than on being engaged in business.
With Indian industry coming of age, the OFB could leverage the strength of the private sector to enable the growth of a strong defence industrial base. Indian policy since independence has emphasised the non-violent character of the Indian state, which ipso fact has led to policies that have prevented the growth of the defence sector. This needs to change. Over time, India should aim to become a leading exporter of arms and ammunition. Given India’s geo-strategic location, a strong and powerful India could contribute immensely to regional stability. The disconnect between the user, the decision maker and the producer needs to be looked into, with much greater user interface being mandated in all matters pertaining to the production and purchase of defence equipment. Accountability and transparency must be inbuilt into future structures to ensure that the nation gets the best available product for its Armed Forces within its limited resources. It is but natural that vested interests within the system will be opposed to change. That would remain the primary challenge in revitalising the Indian defence sector.
The author is an intern at CLAWS. Views expressed are personal.
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