New Delhi: Seven new Defense Public Sector Undertakings (DPSUs) – formed in 2021 following the reorganization of the Ordnance Factory Board (OFB) – will experience a “major decline” in their orders over the next five years, according to a parliamentary panel report.
The Standing Committee on Defense headed by Bharatiya Janata Party (BJP) MP from Odisha Jual Oram has recommended that these companies be promoted overseas to ensure that their manufacturing skills are maintained and their potential is realized. be fully utilized.
The DPSU was formed following the 2021 Union Cabinet’s approval for restructuring the over 200-year-old OFB – which operated 41 ammunition and military equipment production facilities – to improve accountability, efficiency and competitiveness.
New Companies – Munitions India Limited (MIL), Armored Vehicles Corporation Limited (AVANI), Advanced Weapons and Equipment India Limited (AWEIL), Troop Comforts Limited (TCL), Yantra India Limited (YIL), India Optel Limited (IOL), and Glider India Limited (GIL) – Began operations from 1 October that year.
The report prepared by the Standing Committee on Defense on Demands for Grants of the Ministry of Defense for 2023-24 and titled ‘Ordnance Directorate (Coordination and Services) – New DPSUs, Defense Research and Development Organization and National Cadet Corps’ was tabled in Parliament last week was presented.
Meanwhile, a government release also mentioned that even though most firms have registered profits in their first six months, their exports have also declined.
order book status
“From the information provided by the Ministry of Defense on the position of the order book for the newly created DPSUs for the next five years, it is observed that there has been a steep decline in those of AWEIL, TCL and IOL. There is ‘zero’ order book position registered for TCL from 2026-2028. The same situation exists for MIL during this period. GIL also has ‘zero’ orders for 2027-28.
A comparison of the order book position of DPSUs in 2023-24 and 2027-28 shows a steep decline. MIL’s order book to become zero in 2027-28, from Rs 6,788.81 crore in 2023-24,
AVNL’s order book declined to Rs 560 crore from Rs 5,065.40 crore. AWEIL declined from Rs 1,915 crore to Rs 385 crore, that of TCL to nil from Rs 88.89 crore, and the order book for IOL declined to Rs 8.39 crore from Rs 2,004.98 crore. For GIL also it reduced from Rs 131.5 crore to nil.
In the report, the committee also noted that exports by new DPSUs have been declining year-on-year. Exports only Rs. 81.08 crore in 2021-22 from Rs 94.61 crore in 2020-21, which was lower than Rs 140.94 crore in 2019-20.
“The Committee understands that primarily the DPSUs are meant to supply arms and ammunition to the Indian Armed Forces, but exports bring not only name to the country but also valuable foreign exchange. The Committee, therefore, recommends that more emphasis should be laid on increasing exports.
make way
Noting that the new DPSUs have been designed and dedicated for the specific purpose of meeting the requirements of the Defense Forces, especially the Army, and have a vital role to play during war, the Committee recommended that the “Department of Defense Production These PSUs should start promoting outside the country through Defense Attaches or Ambassadors/High Commissioners.
This, it said, would “ensure adequate export orders in addition to domestic demand…so that the manufacturing prowess of the new DPSUs can be maintained and their potential fully utilised”.
It is to be noted that any work awarded to the erstwhile OFB is now considered as honorary contract for the new DPSU.
However, there is no provision for profit in these deemed contracts. “Therefore, the Committee desire that in order to ensure long-term sustainable growth and commercial viability of these new entities, it would be desirable to incorporate a reasonable profit element which in the categorical opinion of the Committee should be around 7 per cent in the deemed contracts. Since it Already nine existing DPSUs are being made available.”
Support to DPSU
According to an official release, all these companies, except YIL, registered provisional profit during the first six months of their business, i.e. from October 1, 2021 to March 31, 2022.
In a statement issued in April 2022, the government said that it had taken several steps to initially help and support these new defense companies to start their business as corporate entities.
“Within the first six months, these new companies have achieved a turnover of over Rs 8,400 crore… Right from day one, these companies have started exploring new markets and expanding their business including exports. Within a short span of time since their inception, these companies have been able to bag domestic contracts and export orders worth over Rs 3,000 crore and Rs 600 crore respectively.
(Edited by Smriti Sinha)
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