India Drops a Bombshell

In mid-June, Indian Defense Minister Rajnath Singh announced the Indian cabinet had decided to abolish the Ordnance Factory Board, the national body that oversees the production of defense equipment ranging from ammunition to armored vehicles. The existing 41 factories, dispersed across India, will now be folded into seven units. Each new and consolidated entity will focus on a particular element of military production. The Vehicles group, for example, will be responsible for the development of tanks, infantry combat vehicles, and mine-protected vehicles. The Ammunition and Explosives group will produce ammunition and explosives, both for domestic needs as well as for export.

This reform, once it is implemented, will be dramatic. It would effectively terminate an organization with an over 300-year history, hearkening back to the days of the East India Company, which preceded formal British colonial rule in India. Under its aegis, a gunpowder factory was created in the present-day state of West Bengal as early as 1787. To this day, a government-run factory that manufactures rifles for both the armed services and civilians exists at that spot. Under the British, 18 more factories were built under the Ordnance Factory Board, and a host of others were built after India’s independence in 1947.

What explains the government’s decision to upend the organization of this vast, sprawling complex of factories? The stated reasons, at least on the face of it, make considerable sense. According to the government, the restructuring plans are designed to make the factories more productive and profitable, to enhance their competitiveness, and to boost quality and enhance cost efficiency.

It is, indeed, overdue for a streamlining and rationalization process, with the factories employing more than 100,000 people. The companies’ historical and current production record has not been inspiring. During the tenure of V.K. Krishna Menon, the Indian defense minister who presided over the disastrous Sino-Indian border war in 1962, the ordnance factories were producing coffee percolators, among other items, despite a paucity of actual ordnance. Multiple sources, both journalistic and academic, affirm this account is far from apocryphal.

The factories have been plagued with significant cost overruns, persistent delays in product delivery, and frequently shoddy results.

Even after the 1962 border war debacle, these factories’ performances have been far from exemplary. They have been plagued with significant cost overruns, persistent delays in product delivery, and frequently shoddy results. Even today, after decades of effort, they have failed to produce a reliable standard-issue rifle for the Indian armed forces. The current model, the INSAS, tends to overheat under combat conditions, has a tendency to jam, and has been known to spray oil on combat personnel when in use. Since the ordnance factories are the sole suppliers of this weapon, they have not been subject to any form of market discipline.

The INSAS, of course, is not the only weapon known for its subpar performance. A host of other products from India’s ordnance factories have been found wanting. Even boots and uniforms have been a problem, forcing soldiers to procure their own. The Indian Ministry of Defence had been aware of complaints for some time and even expressed its unhappiness with its lack of innovation and unreliable products.

Such problems are, no doubt, real and compelling. However, the ordnance factories alone should not bear the brunt of the blame. In considerable part, they are dependent on yet another behemoth government entity: the Defence Research and Development Organisation (DRDO), an array of defense laboratories that produce many of the weapon prototypes. Created in 1958, today it is believed this institution runs as many as 50 labs and employs more than 20,000 scientific and technical personnel.

Like the factories that produce what the DRDO develops, its record has been less than stellar. It, too, is known for delays, cost overruns, and, most importantly, poor defense equipment designs. For example, the Arjun, meant to be India’s main battle tank, was developed under the auspices of the DRDO and manufactured in an ordnance factory. It is riddled with problems. Among other matters, the sheer weight of the tank has limited its deployment range. Many bridges in Punjab, India, bordering Pakistan, simply cannot withstand the weight of the tank.

This is not the only white elephant the Indian defense industrial establishment has produced. Despite plans for the development of an indigenous engine for an Indian light combat aircraft (LCA) as early as 1983, as of last year, the project had demonstrated little promise. Instead, all versions of the LCA are dependent on foreign engines, including the latest model under development.

In the end, the principle problems facing the Indian defense industrial establishment are not the organization of the Ordnance Factory Board but two other issues. First, it has, for the most part, been shielded from competition­—both domestic and foreign. Consequently, it has had little incentive to cut costs, improve efficiency, or innovate. Second, even though it has been subjected to occasional scrutiny from India’s Comptroller and Auditor General’s office, the lack of sufficient parliamentary interest and expertise has enabled the defense industrial establishment to deftly avoid adequate scrutiny through a reliance on an array of smoke and mirrors.

Unless the latest reform is implemented with an eye toward those problems—and there is little indication it will be—the dramatic announcement may simply spur a rearrangement of deck chairs on a sinking vessel.