Defence Public Sector Undertakings Go From White Elephant to Roaring Tiger, Turning Over Rs 8,400 Crore

Six of the seven new Defence Public Sector Undertakings (DPSUs) have registered provisional profits and a turnover of Rs 8,400 crore six months after their formation, indicating the start of the transformation of an erstwhile institution plagued by complaints of poor quality products and unionisation.

The seven DPSUs were founded on October 1 last year, after the Ordnance Factory Board, which had been in operation for 246 years, was disbanded (OFB).

Except for Yantra India Limited (YIL), the other six 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 all reported provisional profits, according to a statement released by the Ministry of Defence on Friday.

MIL, AVNL, and IOL have made earnings of Rs 28 crore, Rs 33.09 crore, and Rs 60.44 crore in the last six months, according to provisional estimates. According to the numbers, AWEIL, GIL, and TCL made profits of Rs 4.84 crore, Rs 1.32 crore, and Rs 26 crore, respectively.

According to provisional estimates, YIL is the only DPSU to lose Rs 111.49 crore.

START OF A TRANSFORMATION

Despite the fact that the new corporate organisations have only been in existence for six months and the data are tentative, the Defence Ministry’s average six-monthly figures for the preceding three years reveal that they have all experienced losses.

It’s not apparent which exact ordering the provisional data took into consideration right once. Contracts that haven’t been finalised or are in the works could potentially be included.

The Indian Armed Forces, the OFB’s largest customer, had previously complained about the poor quality of equipment delivered, which had resulted in accidents and slowed output.

These companies were able to acquire domestic contracts and export orders worth over Rs 3,000 crore and Rs 600 crore, respectively, according to the statement. The majority of export orders have thus far gone to the private defence industry.

“The MIL has received a Rs 500 crore ammunition export order, which is one of the largest ever. These businesses are also taking steps to develop new products, both internally and through collaboration. The YIL has received orders for Axles worth Rs 251 crore from Indian Railways, according to the release.

GOVT HANDHOLDING THE DPSUS

After months of tense talks between the OFB workers and the government, the organisation was disbanded and the DPSUs were born.

Much of the earnings of the companies can be traced to the smooth transition they had after their foundation, with the defence ministry actively assisting them.

For example, the defence budget for 2022-23 set aside Rs 3,810 crore for these DPSUs, with Rs 2,500 crore for emergency authorisation to meet any immediate operational requirements and Rs 1,310 crore for handholding them in the early years toward planned modernization if their financial targets are not met immediately.

An Empowered Group of Ministers (EGoM) led by Defence Minister Rajnath Singh recommended the creation of this fund.

In addition, outstanding indents with the former OFB were grandfathered and converted into presumed contracts worth approximately Rs 70,776 crore.

In order to meet the targets for the Financial Year 2021-22, at least Rs 7,765 crore was credited to the new defence businesses as a 60 percent mobilisation advance before the start of business date.

During the current fiscal year, the government has already released Rs 2,765.95 crore to the seven new firms for capital expenditure and equity.

According to the statement, during the last six months, these new organisations have been able to save a total of 9.48 percent in areas such as overtime work and non-production activities.

Once the handholding of the first few years is done, it remains to be seen if the enterprises will be able to continue to make profits and support themselves with adequate orders.

According to the Defense Ministry, the enterprises’ performance is being monitored on a regular basis in order to determine whether any intervention is necessary.