Ordnance Factory Board: Corporatisation and the 7 Defence PSUs

In 2021, India dissolved a 42-year-old defence organisation in a single day. It then took five more years to fully settle what happened to its employees. This lesson tells the story of the Ordnance Factory Board, the seven companies that replaced it, and what the change meant.

1Chapter 1: A Long History

Must Know

From 1712 to 1979

• 1712: India’s first ordnance factory, a gunpowder factory at Ichhapur, is set up by the Dutch Ostend Company.
• 1801–1802: the Gun Carriage Agency at Cossipore is set up. Production starts on 18 March 1802.
• 2 April 1979: the Ordnance Factory Board (OFB) is formally constituted.
• Ordnance-factory production in India is much older than the Board itself.

The 2020–21 reform

• 16 May 2020: the government announces plans to corporatise OFB.
• It was part of the Atmanirbhar Bharat (self-reliant India) push. The aim was more autonomy, accountability and efficiency in defence production.
• 1 October 2021: OFB is dissolved. Its 41 production units pass to 7 new Defence PSUs.
• 5 July 2026: the government confirms nearly 65,000 former OF employees are now in Regular Government Service.

2Chapter 2: What Corporatisation Changed

Must Know

Department to company

• Before 2021, OFB was a government department, like a ministry office.
• It was funded straight from the budget and did not have to make a profit.
• After corporatisation, each of the 7 PSUs is a company with its own board, accounts and pressure to run efficiently.
• This is the real point of the reform.
• A company can be held accountable for its own performance and losses. A department that never has to compete for funding usually cannot.

The seven companies

• Munitions India Limited: ammunition and explosives.
• Armoured Vehicles Nigam Limited: tanks and armoured vehicles.
• Advanced Weapons and Equipment India Limited: weapons and combat equipment.
• Troop Comforts Limited: clothing and general stores for troops.
• Yantra India Limited: vehicles and equipment.
• India Optel Limited: optical and electronic devices.
• Gliders India Limited: parachutes and allied items.
• Corporatisation passed management, control and operations of 41 production units to these seven.
• Read more: India’s Security and Intelligence Agencies.

3Chapter 3: The People Question

Good to Know

Deemed deputation

• At corporatisation, employees were placed on deemed deputation, not permanently transferred.
• This answered a major employee-union worry at the time.
• As a member of an Empowered Group of Ministers (EGoM), Dr. Jitendra Singh had earlier backed extending deemed deputation until retirement.

Permanence in 2026

• On 5 July 2026, Dr. Jitendra Singh confirmed nearly 65,000 former OF employees had been redeployed into Regular Government Service.
• This resolved one of corporatisation’s biggest concerns: long-term job security for staff who never chose to leave government service.
• It went further than deputation by making that security permanent.
• A 19-member Bharatiya Mazdoor Sangh (BMS) delegation met Minister of State Dr. Jitendra Singh in 2026. Employee-welfare engagement continued years later.

4Chapter 4: A Familiar Reform Pattern

Great to Know

Structure first, delivery later

• Corporatisation happened in 2021. Its human effects took five more years to settle.
• Structural change often arrives years before full implementation catches up.
• The RTE Act, 2009 is a similar case. Over a decade later, reports suggest only about a quarter of schools meet its full infrastructure norms.
• Read more: The Right of Children to Free and Compulsory Education Act, 2009.
• Other institutions rebuilt from older systems: Counter-Narcotics Enforcement in India: NCB and the Drug Enforcement Architecture and Competition Commission of India (CCI).
• For how corporatised public bodies are regulated, see Regulatory Bodies Governing India’s Economy.

Where defence production stands now

• India’s domestic defence production hit a record Rs 1.78 lakh crore in 2025-26.
• In 2013-14, it was only about Rs 43,000 crore.
• More home production means fewer imports and less foreign exchange spent.
• Source: Akashvani News.

Quick Q&A

• OFB formed? 2 April 1979.
• Dissolved? 1 October 2021.
• New PSUs? Seven.
• Units moved? 41.
• Employees redeployed? Nearly 65,000.