Defence Federations Reject Profits Claimed by Former OFB Units

New Delhi: Days after the Union Ministry of Defence (MoD) claimed that the newly formed defence companies posted profits, suggesting a reversal of the trend of accumulating losses when they were administered under the erstwhile Ordnance Factory Board (OFB), recognised defence employee federations have called the comparison to be “unfair,” done “to propagate half-truths.”

According to them, the “performance of the pandemic era” cannot be shown as representative of the performance of OFB when comparing it to that of the seven Defence Public Sector Units (DPSUs).

Six of the seven defence companies, carved out last year in October after the controversial corporatisation of the OFB, reported provisional profits in the first six months of their business, MoD said in a statement earlier last month.

Except Yantra India Limited (YIL), all other companies – Munitions India Limited (MIL); Armoured Vehicles Nigam Limited (AVANI); Advanced Weapons and Equipment India Limited (AWE India); Troop Comforts Limited (TCL); India Optel Limited (IOL) and Gliders India Limited (GIL) have reported provisional profits in the period extending from October 1, 2021, to March 31, 2022, the MoD said in an official statement.

According to the official estimates shared, none of the seven companies was making any profits if one were to observe their average six-monthly figures three years before the OFB’s corporatisation.

The recognised federations, however, have rejected these claims.

“It is pertinent to mention that the apples and oranges are non-comparable. OFB & New DPSUs are incomparable until and unless a just and impartial yardstick/parameter of comparison is pre-decided,” they said in a joint letter dated May 23, addressed to Defence Minister Rajnath Singh.

The letter was signed by the All India Defence Employees Federation (AIDEF), RSS-backed Bharatiya Pratiraksha Mazdoor Sangh (BPMS), and Confederation of Defence Recognised Associations (CDRA).

On Friday, C Srikumar, general secretary, AIDEF, told NewsClick that the picture that the MoD is trying to portray is “misleading.”

“The latest data is nothing but a clever play of numbers used to justify an unjust and unpopular decision,” he said.

He added that, in doing so, the Central government is also “overlooking” the potential “difficulties” that the defence companies are to face in the years to come.

Challenges Ahead for DPSUs

According to MoD’s estimates, the average six-monthly loss of MIL during the last three years was Rs 677.33 crore; Rs 164.33 crore for AVNL; Rs 5.67 crore for IOL; Rs 348.17 crore for YIL; Rs 398.5 crore for AWEIL; Rs 43.67 crore for GIL; and that for TCL to be at Rs 138.17.

However, these numbers were only to be expected, argued the employees’ federations, given that the financial years 2019-20 and 2020-21 were heavily affected by the Covid-19 pandemic, “in which the import of materials resulted in breaking of the national supply chain, a sharp increase in the price of materials, hiccups in the supply of spare parts, equipment & machinery, etc. adversely influenced the operations of the OFB.”

“Orders worth Rs 3400 crore 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,” the federations further said.

In the first six months of the defence companies, the provisional profits stood at Rs 28 crore for MIL; Rs 33.09 for AVNL; Rs 60.44 for IOL; Rs 4.84 for AWEIL; Rs 1.32 crore for GIL; and Rs 26 crore for TCL.

However, the said comparison does not hold up since the DPSUs, “are not to incur any expenditure on accounts of Schools, Hospitals, Pension, etc.,” according to the federations, adding that this was not the case while calculating the earlier estimates.

Notably, in 2016-17 and 2017-18, the OFB reported profits even while including the above expenditures, according to estimates shared by the employees’ federations.

Meanwhile, leaders of the federations highlight the challenges that the new firms are facing.

“Many of the DPSUs have 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 and their families at the residential estates,” Srikumar told NewsClick on Friday.

The payments towards the Micro, Small & Medium Enterprises (MSMEs) have also been “withheld or delayed,” he alleged, adding that several MSMEs have also gone into filing complaints against these DPSUs regarding the same.

Last year, the erstwhile OFB, overseeing 41 ordnance factories across the country, was dissolved into seven defence companies, in a decision flayed by the employees’ federation, which staged a strike action in protest against the same.

Later, the federations also called out the Central government for not keeping its promise to dilute the service conditions of the defence civilian employees post corporatisation.