ALL INDIA DEFENCE EMPLOYEES’ FEDERATION

BHARTIYA PRATIRAKSHA MAZDOOR SANGH

(RECOGNIZED FEDERATIONS OF DEFENCE CIVILIAN EMPLOYEES)

CONFEDERATION OF DEFENCE RECOGNISED ASSOCIATIONS

Ref. No. : 152/AIDEF/BPMS/CDRA/22 Date : 23.05.2022

To,
Hon’ble Shri Rajnath Singh Ji
Raksha Mantri, Government of India
104, South Block, New Delhi - 11
E-Mail: rmo@mod.nic.in

Subject : True picture of the 6 months progress of the splintered 7

Ordnance Factory Corporations.

Respected Sir,
The news of 6 out of 7 New DPSUs carved out of the erstwhile OFB have shown
Profit has got wide coverage throughout Online, Print Media Portals as well as on various
Social Media Portals. The above is claimed to have been based on provisional data of their
working for past 6 months. It appears to be, prima facie, an extraordinary achievement
since the same has been juxtaposed against the claim of loss incurred by Ordnance
Factories under the OFB for the past 3 years before corporatisation.
Admirably, an over-enthusiastic headline was also made out to present this
phenomenon “From White Elephant to Roaring Tiger…….”, as if the preliminary &
initial data was good enough to believe the claim as truthful. The history of Industries &
Commerce is abound with numerous such examples when a ‘White Elephant’ was
transformed into a ‘Roaring Tiger’ or conversely, a Roaring Tiger not being able to adapt to
the changing times transforming into a White Elephant. Most of these transformational
experiences are taught in most of the Top Class National & Global B-Schools. Expectedly,
drastic and magical transformation of these New DPSUs would seemingly secure its place
into the list of those case studies. If the Claims of High-Ranking Officials of the Ministry of
Defence are to be believed and the Preliminary & Initial Data are to be accepted as the true
representation, it will be considered an unparallel & exceptional case falling into a category
of “never been seen or heard” where such a revolutionary industrial restructuring
transforming a White Elephant into a Roaring Tiger with such swiftness! Hence, the loud
claim of miraculous phenomena needs close scrutiny and compelling to undertake an in-
depth study of the same.
To explore all the aspects of truth behind the aforementioned ‘miraculous’ profit-
making by the 06 New DPSUs, the followings are the relevant figures taken from Annual
Accounts of erstwhile OFB till Sep’2021.

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 ₹ in Crores Actual Actual Actual Actual Actual Actual
2016- 2017- 2018- 2019- 2020- 2021-
2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY
(upto
Sep’2021)
Annual
Account
Total Income 14617.09 14801.13 11760.30 8655.02 8773.70 1972.11
Total 14274.56 14137.08 13607.61 11807.76 13128.34 4884.37
Expenditure
Total 342.53 664.05 -1847.31 -3152.75 -4354.64 -2912.26
Deficit/Surplus

HQRS Expenditure @ ₹ 145 Crores per Year (Approx)

Hospitals Expenditure @ ₹ 190 Crores per Year (Approx)
Schools Expenditure @ ₹ 52 Crores per Year (Approx)

 The tabulated data explicitly shows that for FYs 2016-2017 & 2017-2018, the OFB
was in surplus of ₹342.53 Crores & ₹664.05 Crores respectively, i.e., till FY 2017-2018
OFs were not loss-making.
 It is worth mentioning that the claimed profits for the last 2 Quarters of 2021-2022
by the New DPSUs don’t include the expenditures incurred on Schools, Hospitals etc
as the same is being borne by the Government. Whereas, during the FYs 2016-2017
& 2017-2018 or before the expenditure on schools, hospitals and employees of HQrs
formation of erstwhile OFB were charged to their expenditure. Presently, the
Government is bearing the liable for expenditure with regard to pensioners under
the Old Pension Scheme even for the employees deemed deputed to the these 7
new DPSUs. However, expenditure of erstwhile OFB includes these as well.
 It is pertinent to mention that the apples and oranges are non-comparable. OFB &
New DPSUs as well are incomparable until and unless a just and impartial
yardstick/parameter of comparison are pre-decided. Therefore, the current
comparison showing profits without setting just and impartial yardstick/parameters
would be not only unfair but if done intentionally, it is to propagate half-truths or
half-lies for some specific objective. If the comparison between New DPSUs and OFB
is done excluding the expenses of Schools, Hospitals and Pension, etc. the surplus
for FYs 2016-2017 & 2017-2018 will rise by ₹1100 Crores and the OFB will not
qualify as the so-called “White Elephant” till FY 2017-2018.

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 Similarly, from FY 2018-2019 to FY 2020-2021, the deficit will be drastically reduced
if the expenses of Schools, Hospitals, Pensions, etc taken out from the annual
expenditure shown above. Orders worth ₹3400 in the FY 2018-2019 were cancelled,
mid-way by the Services and the expenditure got incurred on procuring materials
against those orders hence the expenditure got recorded in its book of accounts,
however, the final product couldn’t be issued.
 Normally, the Ammunition & Explosives Division and Armoured Vehicles Division of
the erstwhile OFB have always been in surplus, The FYs 2019-2020 & 2020-2021 were
heavily affected by the COVID-19 pandemic, in which the import of materials
resulted in breaking of the national supply chain, sharp increase in price of
materials, hiccups in supply of spare parts, equipment & machinery, etc. adversely
influenced the operations of the OFB. Hence, the performance of the pandemic era
can’t be show cased as representative of performance of erstwhile OFB.
 For the FY 2021-2022, till September total Expenditure was ₹4884.37 Crores while
the issue was only to the extent of ₹1972.11 Crores, indicating that a huge portion
of the work done under the erstwhile OFB was “Work in Progress” (WIP). These WIP
products of OFB were finally issued by the new DPSUs to unfairly earn the credit of
issuing it. Most of the procurement actions of all the direct and indirect production
items were initiated immediately after the receipt of tentative orders from the
Buyers (Usually by Jan-Feb of Every Year). Hence, the delivery of the items &
payment for the same majorly were carried out on the accounts of the OFB and not
the DPSUs. Has this expenditure made by OFB for future DPSUs been included in the
accounts of the DPSUs? The cherry on the Top is that the DPSUs are not to incur
any expenditure on accounts of Schools, Hospitals, Pension, etc. However, even in
such circumstances, have the New DPSUs truly been in the profit as has been
claimed?
 For example, the 06 DPSUs out of 07 (excluding Yantra India Limited) that have
claimed to have gained profit have supplied items of only worth ₹3000 Crores out of
the total orders worth ₹12000 Crores falling short ₹9000 Crores of the target.
Despite this, profits can be earned in only 02 possible conditions- (It’s come to
light that ‘slippages in deliveries’ are up to 47% to 100% for revenue &
capital products. The same may be inquired into impartially by the
Government of India):

a) Drastic Reduction in the Costs of Input Material to the DPSUs Compared to

Previous years of OFB.
b) Unprecedented Rise in the Cost/Rate of Final Product.

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 However, while the whole world is miserably suffering from inflation and price rise,
the aforementioned hypotheses (a) is infeasible and impossible. In such a scenario
of Extremely High Input Costs and achievement of only 25% of the target, the Profit
could still be achieved if and only if the Buyer (Armed Forces & Armed Police Forces)
are happily willing to pay the Hiked Price as per our Hypothesis (b). However, with
no substantial increase in the budget/ financial outlay for the buyers, makes this
Hypothesis (b) infeasible and impossible. Any such drastic and sharp increase in
prices would defeat the purpose of the corporatisation itself.
 For another example, if the Gliders India Limited, which is having only one
Production Unit and around 1600 Employees, doesn’t have a turnover of ₹200
Crores, even reaching the Break-Even will not be possible considering the salaries
and allowances of the employees (the factory has given a turnover of more ₹300
Crores once under OFB). Whereas, the GIL with only ₹120 Crores of approximate
turnover in the FY 2021-2022, has claimed a profit of ₹40 Crores!
 All the government employees posted in the Factories & Operational Units were en-
masse transferred to the DPSUs on 01/10/2021, with all the service benefits Status
Quo Ante, with no change in the service conditions. However, except Salary every
other benefit such as LTC Advance, Medical Reimbursement (Ridiculously Low
Settlement Amount), Temporary Duty Allowances & Entitlements, Pension
Contributions, Office Supplies, etc. have been delayed or not paid in time. Even the
assurances given by the Hon’ble RM, decision of the Cabinet and the commitments
given before the Hon’ble High Court are being violated by the Corporations, such as
weekly working hours are being changed from 44¾ hours to 48 hours,
Compassionate appointment are not being granted to the wards of deceased
employees etc.
 Many of the DPSUs (AWEIL/MIL/TCL etc.) has indefinitely stopped or drastically
reduced any new expenditure liability in the Maintenance of Buildings &
Infrastructure, which has already started affecting the Employees in the workplace
as well as their families at the residential estates.
 The payments towards the Micro, Small & Medium Enterprises have been withheld,
delayed, or both by the DPSUs affecting the livelihood of the Enterprises. Several of
the MSMEs have also gone into filing complaints against these DPSUs with the
MSEFC for the delayed or no payments.

In view of the above data & facts, the following quote by Famous Economist Ronald
Coase seems to be the most suitable:
“The figures are innocent people who, under the solicitation, under torture,
very quickly confess what is asked of them, even if it means retracting later. ”
In such a situation, is the provisional data from the new DPSUs a tormented data?
Is his tormented data, instead of being an accurate representation of the facts,
misrepresenting the profits under any undue influence and fear? Who wants to take all the
credit without an in-depth assessment of the situation?
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 We are the Employees of an Organization, whose capabilities & leadership have
persistently been under questioning and criticism in recent past. All possible efforts have
been put in to shatter our morale and confidence. It has been propagated that the
corporatization is the direct outcome of our failures. Why should we feel offended and hurt
now that a claim is being made to have converted a White Elephant into a Roaring Tiger
just within 06 Months? Where were High Ranking Officials of the DDP, who are now taking
the credit for being the Magicians bringing about transformation, when the Ordnance
Factories under their control were being mercilessly criticized in the last few years. The
responsibility for the criticism must’ve been taken by the same High Ranking DDP Officials
who are now claiming the Magical Profits.
Objective & impartial criticism have always been welcomed; however, we have
always believed that those motivated merciless criticism was far from reality. Similarly, we
disregard and reject the magical profits being claimed by the new DPSUs based on the
provisional data, the truthfulness of which is under cloud. We are of the firm view that
Ordnance Factories with all the non-support from DDP have always preformed, but in the
past as is evident from the past Parliamentary Standing Committee Reports. Therefore, we
once again request that Ordnance Factories may please be brought back to the
Government set up as was existing on 30/09/2021 and we are prepared to sit with the
Government to find out ways and means for further improvement of the Ordnance
Factories in the Government setup and reiterate our support and cooperation in this
regard to the Government.

Thanking you,
Yours Sincerely,

(C. SRIKUMAR) (MUKESH SINGH) (AJAY)

General Secretary/AIDEF General Secretary/BPMS Addl.General Secretary / CDRA
09444080885 09335621629 09999766016
defempfed@gmail.com gensecbpms@yahoo.co.in gscdra@gmail.com

Copy to :
1) The Secretary (DP)
Department of Defence Production
South Block, New Delhi – 110 001. For your kind information and
2) The Addl. Secretary (DP)
favourable action please.
Department of Defence Production
South Block, New Delhi – 110 001.