In tune with a decision by the Union Cabinet, the Ordnance Factory Board (OFB) will stand dissolved with effect from October 1 and its assets, employees and management are being transferred to seven newly established defence public sector undertakings (DPSUs), according to an official order by the defence ministry.

The name of the seven defence PSUs are Munition India Ltd, Armoured Vehicles Nigam Ltd, Advanced Weapons and Equipment India Ltd, Troop Comforts Ltd, Yantra India Ltd, India Optel Ltd and Gliders India Ltd, the ministry said in its order.

In a major reform initiative, the Cabinet on June 16 had approved a long-pending proposal to restructure the over 200-year-old Ordnance Factory Board that operates 41 ammunition and military equipment production facilities into seven state-owned corporate entities to improve its accountability, efficiency and competitiveness.

Defence Minister Rajnath Singh already clarified that there will be no change in service conditions of nearly 70,000 employees of the organisation and the decision to corporatise the OFB is driven by efforts to boost India's defence manufacturing sector.

In the order dated September 28, the defence ministry said: "Government of India has decided to transfer, with effect from October 1, the management, control, operations and maintenance of these 41 production units and identified non-production units to seven government companies (wholly owned by the government of India)."

The OFB is currently a defence ministry entity and supplies critical arms and ammunition to the three armed forces and the paramilitary.

"The government has decided that all the employees of OFB (Groups A, B and C) belonging to the production units and also the identified non-production units shall be transferred en masse to the new DPSUs on terms of foreign service without any deputation allowance (deemed deputation) initially for a period of two years from the appointed date," the order said.

It said each of the new DPSUs is required to frame rules and regulations related to service conditions of the absorbed employees and seek an option for permanent absorption from the employees on deemed deputation to the respective DPSUs within a period of two years.

"The service conditions of the absorbed employees would not be inferior to the existing ones," the order said, adding a committee would be constituted by the Department of Defence Production (DDP) for guiding the new DPSUs that the absorption package given is attractive.

It said the pension liabilities of the retirees and existing employees will continue to be borne by the government from the defence ministry's budget.

"For the employees recruited after January 1, 2004, the National Pension Scheme applicable to the Central Government employees is in vogue and the same may be adopted by the new DPSUs, including the continuation of all special provisions applicable to Central government employees under the National Pension System," it said.