Better Late Than Never

The OFB to produce small weapons, engine parts and ammunition that are being imported

Rohan Ramesh

In line with the government’s ‘Make in India’ drive, the Ordnance Factory Board (OFB) has undertaken steps to indigenise defence production in ordnance factories. The OFB has come out with its procurement manual 2018, which underlines import substitution of stores procurement with indigenous manufacturing. The 286-page manual is exhaustive and seeks to enhance ease of doing business, creating a level playing field for indigenous vendors and start-ups.

Ammunition at OFB stand

The detailed manual lists out items that the various units under OFB are importing, which vendors with production facilities can produce. Most of these made-to-order items are currently being imported and build indigenous vendor capacity and encourage production in the private sector. In order to encourage private production, way back in 2009 itself, the ministry of defence (MoD) had kept OFB out of the Defence Procurement Manual (DPM) brought out by the MoD that year.

Indigenisation of major parts of the inputs required to produce military hardware faces major challenges. Most of such parts have very stringent quality specifications that are normally not applicable in commercial production eco-systems, and therefore, are available only as made-to-order. Most of them have limited order book scope, discouraging suppliers, for whom scale of production, stability and regularity of orders are a major requirement.

Also, with clear defence specifications, most such items have no scope in other fields of applications. Also, defence factories’ inventories are dictated by the strategic security environment, and hence the order book volatility deters vendors and suppliers from setting up production and supply chains.

The OFB manual seeks to meet such challenges and develop a procurement policy that can overcome the problems, and yet set up a rational, indigenous production and supply system, that can save valuable foreign exchange, and encourage production in private sector which can go towards setting up an indigenous defence production and supply ecosystem.

Given the vast range of inputs needed by production units under OFB, and the limited numbers needed, the manual seeks to encourage production by Medium, Small and Micro Enterprises (MSMEs).

In order to encourage such vendor/suppliers, the manual has offered a range of incentives.

The manual states: ‘Government of India has issued general directives on (i) mandatory/ preferential purchase of specified goods from specified suppliers (ii) extension of price preference (iii) exemptions/ relaxation from certain tender conditions like tender fee, EMD, PSD, etc., to certain categories of suppliers. In procurements attracting these general directives, the contemporary directives of the government of India should be checked (from the relevant website) for necessary action. These contemporary directives shall apply in the procurement of Commercially-off-the-shelf (COTS) as well as made-to-order (MTO) items. DDP may issue separate directives indicating the eligibility and nature of concession/relaxation in order to promote MSEs (Micro & Small Enterprises), Start-ups, Stand-ups etc. to be followed.’

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