From White Elephant to Roaring Tiger, Defence PSUs Make Profits, Achieve Turnover of Rs 8,400 Crore

Six months after they were formed, six of the seven new Defence Public Sector Undertakings (DPSUs) have registered provisional profits and achieved a turnover of Rs 8,400 crore, indicating the beginning of the transformation of an erstwhile institution which was plagued with complaints of poor quality products and unionisation.

The seven DPSUs were formed on October 1 last year and carved out of the erstwhile 246-year-old Ordnance Factory Board (OFB).

As per a statement issued by the Ministry of Defence on Friday, except 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.

As per the provisional figures for the past six months, MIL, AVNL and IOL have registered profits worth Rs 28 crore, Rs 33.09 crore and Rs 60.44 crore, respectively. The profits for AWEIL, GIL and TCL were Rs 4.84 crore, Rs 1.32 crore and Rs 26 crore, as per the figures.

YIL is the only DPSU to register a loss of Rs 111.49 crore, as per the provisional figures.

START OF A TRANSFORMATION

While it has been only six months since the new corporate entities came into existence and the figures are provisional, the average six-monthly figures for the past three years released by the Defence Ministry show that all of them had registered losses.

It is immediately not clear which exact orders the provisional figures have taken into account. They could also include contracts which are yet to be finalised or are in the pipeline.

Also the Indian Armed Forces — the biggest customer of the OFB — had raised several complaints in the past on the poor quality of equipment delivered, which had led to accidents and slow pace of production.

As per the statement, these companies were able to secure domestic contracts and export orders worth over Rs 3,000 crore and Rs 600 crore, respectively. So far, the private defence industry had bagged a majority of export orders.

“The MIL has bagged one of the biggest ever export order of ammunition of Rs 500 crore. These companies are also taking measures for developing new products through in-house as well as collaborative efforts. The YIL has bagged orders of about Rs 251 crore from Indian Railways for Axles,” the statement said.

GOVT HANDHOLDING THE DPSUS

It took months of hectic negotiations between the OFB workers and the government before the organisation was dissolved to give birth to the DPSUs.

Much of the firms’ profits can be attributed to the soft landing they had after their formation, with the defence ministry taking multiple steps to actively handhold them.

For instance, the defence budget for 2022-23 set aside a total of Rs 3,810 crore for these DPSUs, of which Rs 2,500 crore is for emergency authorisation to meet any immediate operational requirements and Rs 1,310 crore for handholding them in the initial years towards planned modernisation, if their financial targets are not realised immediately.

The recommendation of setting up this corpus came from an Empowered Group of Ministers (EGoM) headed by Defence Minister Rajnath Singh.

Moreover, outstanding indents with erstwhile OFB were grandfathered and converted into deemed contracts valuing around Rs 70,776 crore.

At least Rs 7,765 crore were credited to the new defence companies as 60% mobilisation advance before the commencement of business date against the targets for Financial Year 2021-22.

The government has already released an amount of Rs 2,765.95 crore to the seven new companies during the current financial year for capital expenditure and equity.

As per the statement, these new entities have been able to make cumulative savings of about 9.48% in areas such as overtime work and non-production activities during the past six months.

It remains to be seen if the firms would be able to continue making profits and sustain themselves with sufficient orders once the handholding of the initial few years is over.

As per the Defence Ministry, it is monitoring the performances of the firms regularly for any intervention which may be required.

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