Seven New Defence Public Sector Units (DPSUs)

• 18 Oct 2021

Why in News

The Prime Minister dedicated the seven defence Public Sector Undertakings (PSUs), created through the restructuring of the Ordnance Factory Board (OFB), to the nation.

• India’s goal under ‘Atmanirbhar Bharat’ (self-reliant India) is to make the country, on its own, into a big military power.

Key Points

• About:
  
  • Dissolution and Amalgamation:
    
    • The Union government ordered the dissolution of the four-decade-old Ordnance Factory Board (OFB) and amalgamated 41 factories under seven new state-owned companies to manufacture defence hardware ranging from munitions to heavy weapons and vehicles.
      
      • These new companies are headquartered in five cities.
    • OFB was an umbrella body for the ordnance factories and related institutions, and was a subordinate office of the Ministry of Defence (MoD). It was a conglomerate of 41 factories, 9 training Institutes, 3 regional marketing centres and 5 regional controllers of safety.
      
      • It was headquartered at Kolkata.
    • All employees of the erstwhile OFB (Group A, B and C) belonging to production units will be transferred to the corporate entities on deemed deputation for a period of two years without any change in their service conditions as central government staff.
  • Seven New Companies:
    
    • Munitions India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited, and Gliders India Limited.
  • Significance:
    
    • The concerns have been raised regarding high costs, inconsistent quality and delay in supply of OFB products by the armed forces.
    • The new structure will help overcome these various shortcomings in the existing system of OFB and encourage these companies to become competitive and explore new opportunities in the market including exports.
• Self-Reliance in Defence Sector:
  
  • Corporatisation of OFB.
  • Revised FDI Limit: The Foreign Direct Investment (FDI) limit in defence manufacturing under automatic route is raised from 49% to 74%.
  • Defence Industrial Corridor: The government has proposed to establish two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu each.
  • Project Management Unit (PMU): The government is expected to begin time-bound defence procurement and faster decision making by setting up a Project Management Unit (for contract management purposes).
    
    • The Defence Acquisition Procedure (DAP) 2020 has been unveiled.
  • Reduction in Defence Import Bill: The government will notify a list of weapons/platforms banned for imports and thus such items can only be purchased from the domestic market.
    
    • Separate budget provision for domestic capital procurement.

Source: TH