(This was originally posted in Economic Times by Manu Pubby)
The defence ministry has cleared deemed contracts worth Rs 65,000 cr for the seven Public Sector Units (PSUs) being carved out of the Ordnance Factory Board under a ‘grandfathering clause’, with the new entities set to be launched this week by Prime Minister Narendra Modi. The new entities, which have been formed from 41 erstwhile OFB factories, will also get significant advance payments from the defence ministry, central armed police forces and state governments to help them move to a new corporatized structure.
“All the indents previously placed on the OFBs by various services, CAPFs and state police have been converted into deemed contracts. Total number of such contracts numbering 66 have a cumulative value of more than ‘65,000 crore,” officials said, adding that the formal launch will take place on October 15. The largest chunk of this will go to the new Avani Armoured Vehicles that has running contracts from the Army for production of the Arjun Mk1A battle tanks. Officials said that Rs 30,025 crore worth of orders have been given to the entity.
Next on the big contracts list is Advanced Weapons and Equipment India Limited that has got orders worth Rs 4,066 crore. The entity is involved in the manufacturing of small arms and weapons for the armed forces and police. “It was important to ensure grandfathering of orders pending with OFB post corporatisation to ensure continuity in supply of strategic arms and ammunitions to the services, Ministry of Home Affairs and others,” the officials said.
The Department of Defence Production constituted an empowered group to oversee the process and on its recommendation, all pending indents of the services were converted into deemed contracts. It was also decided that 60% of the annual price of the indents would be paid by the services to the new DPSUs as mobilisation advance. For the current financial year, mobilisation advance worth more than Rs 7100 crore has already been paid to the new entities.