Defense Minister Rajnath Singh reviewed the operation of the seven defense companies, spun off from the former Ordnance Factory Board (OFB), at a meeting in New Delhi on September 30 to mark the completion one year of their operations. The companies commenced operations from October 1, 2021 before being consecrated to the nation by Prime Minister Shri Narendra Modi on the occasion of ‘Vijayadashami’ on October 15, 2021.
During the meeting, the Minister of Defense was briefed by Department of Defense Production officials on the progress of these new DPSUs over the past year. Addressing the leaders and employees of the seven companies virtually, Rajnath Singh said the corporatization of OFB was a major reform in the direction of making the country “Aatmanirbhar” by unleashing the true potential of these entities. He appreciated the fact that these companies are moving smoothly along the path of progress with complete autonomy, efficiency and responsibility, while protecting the interests of its employees, which were the basis on which the government took the decision to transform OFB into society.
“The former OFB, with its infrastructure and skilled workforce, was a strategic asset of the country, which made a valuable contribution to national security. However, in recent decades, the armed forces have become concerned about high costs, inconsistent quality, and delays in product supply. As a government service, the OFB had little accountability for profits. There were centuries-old procedures, practices, paperwork and rules and regulations, which had lost their relevance. Getting rid of these practices was the need of the hour and corporatization was the best way forward. The government has owned these companies from the start. It is heartening to see that they are making great strides,” the defense minister said.
An amount of Rs 2,953 crore has been paid to these companies in the form of equity, during the financial years 2021-22 and 2022-23 for the modernization and an additional amount of Rs 6,270 crore is expected to be paid to these companies until in 2026-27 for capital expenditure. In addition, an amount of Rs 3,750 crore has been paid to these companies as an emergency permit fund.
The functional and financial autonomy given to these new legal entities, coupled with government ownership, began to be reflected in their performance. In the space of six months, i.e. from October 1, 2021 to March 31, 2022, these new companies achieved a turnover of over Rs 8,400 crore, which is significant considering the issue value of the old OFB in previous years. Also for the 2022-23 financial year, the seven new DPSUs have planned a cumulative sales target of approx. Rs 17,000 crore, which is significantly higher than previous achievements of the old OFB.
Against the realization of the production of approx. Rs 5,028 crore for the period 01 April 2021 to 30 September 2021, the new DPSUs reported production of over Rs 6,500 crore in the first six months of the 2022-23 financial year. After the corporatization, the new entities showed a marked improvement in productivity and quality in the new business configuration. In the 2021-22 financial year, of seven companies, six reported profits based on interim financial statements.
To further improve the functioning of these DPSUs, Rajnath Singh listed some of the key areas to focus on. Calling the current era as technology-driven, he urged companies to develop or familiarize themselves with the latest technologies, which are vital for the defense industry to make its mark nationally and internationally. He urged them to place special emphasis on modernization through national research and development, as this is the most solid and surest path.
The Defense Minister underscored the need to increase India’s market share across the world, describing it as the responsibility of companies to contribute to the efforts to achieve the target. He called on companies to devise and implement strategies with an aggressive and progressive attitude to make their presence felt in the present time of tenders.
Rajnath Singh called capital investment another important aspect, under which the government currently owns the companies. He, however, said that in this era of competition, DPSUs should be able to raise capital in the market in the coming times, depending on their aspirations.
Underlining the Defense Ministry’s focus on reducing import dependency to achieve Prime Minister Shri Narendra Modi’s vision of “Aatmanirbhar Bharat”, the Defense Minister said the objective of the DPSUs should be to contribute to increased exports. “Defense manufacturing is an important sector to achieve the goal of self-sufficiency. The Ministry of Defense has set a target to achieve a turnover of Rs 1.75 lakh crore in aerospace and defense goods and services by 2025, which includes exports of Rs 35,000 crore . The DPSUs must strive to achieve the goal and take the country to new heights,” he said.
Rajnath Singh expressed his confidence that in the coming times, companies will achieve new milestones in terms of revenue, profitability, market valuation and overall growth. He called the companies force multipliers that will advance the country’s defense production and cement its position on the world stage.
“India is emerging as a global center for defense manufacturing. With the active participation of the private sector, our goal is to bring India among the best countries in the world in the areas of design, production and exports.Today, as our country is rapidly advancing towards a $5 trillion economy, our defense exports have increased 5-6 times to Rs 13,000 crore from the past 7-8 years The new management should explore new overseas opportunities while meeting domestic needs,” said Rajnath Singh. He expressed hope that the new ventures will play an important role in strengthening the manufacturing ecosystem of defence, but will also contribute significantly to the overall development of the economy.
Since their inception, these UPDs have begun to explore avenues to grow their business and have taken an aggressive approach to diversifying their customer base and product profile. In the past year, new ventures secured domestic orders of over Rs. 7,200 crore worth. Some of the significant achievements of the new ventures are listed below:
Munitions India Limited (MIL) has secured export orders worth over Rs 1,500 crore for various types of ammunition over the past year. Gliders India Limited (GIL) has also secured orders for the export of parachutes.
Yantra India Limited (YIL) has made significant progress in product and customer diversification. This has helped them secure orders worth more than Rs. 300 Crores from the non-defense market like Indian Railways.
Troop Comforts Limited (TCL) has developed items such as Bulletproof Vest, Ballistic Helmets, ECWCS etc. to enter a niche market and maintain its activity in the long term.
Nigam Armored Vehicles Limited (AVNL) has developed a new mine protected vehicle variant designed for the CRPF which may also be useful for other armed forces.
Advanced Weapons & Equipment India Limited (AWEIL) has received an order for the supply of JVPC carbines to the Delhi Police.
Munitions India Limited (MIL) was able to successfully test new Pinaka Rocket variants, namely Pinaka Mk-I (Extended Range) and DPICM.
MIL has also successfully developed 40mm UBGL ammunition, 500kg general purpose bombs and 76/62 SRGM HEDA ammunition.
India Optel Limited (IOL) has developed Driver Night Sights for Tanks, a first in fusion imaging technology.
These new entities have initiated various measures aimed at optimizing the use of their resources and reducing their costs. They have also taken various cost saving measures such as reducing expenses for overtime and non-production activities and measures such as using solar power, recycling water, switching to LEDs , etc.
Chief of Defense Staff General Anil Chauhan, Chief of Army Staff General Manoj Pande, Vice Chief of Naval Staff, Vice Admiral SN Ghormade and senior Ministry of Defense officials were present on the occasion.
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