When the Government of India approved the landmark decision in 2021 to corporatize the Ordnance Factory Board (OFB), it was thought to be a daring attempt to infuse new life into an institution that had stood by the nation for almost two centuries. Three years later, the benifit is clear in form better efficiency, increasing exports and financial gain that reflects the robustness of India defence manufacturing reforms.
According to official data shared by the Defence Ministers Office, the reorganisation of the 41 OFB units into seven Defence Public Sector Undertakings (DPSU’s) has delivered remarkable results. In 2019–20, the OFB system posted losses of nearly Rs 2,844 crore. But in FY 2024–25, the new DPSUs collectively registered a net profit of Rs 1,625 crore. This turnaround within a span of four year is being termed as one of the most successful recent history defence sector reforms.
The Defence Ministry (MoD) long raised concerns about accountability and inefficiency of the OFB. By merging several entities into seven standalone companies Munitions India Limited (MIL), Armoured Vehicles Nigam Limited (AVNL), India Optel Limited (IOL) and four others, the government sought to impose corporate discipline, competitiveness and innovation.
The Export Story: From Margins to Markets
Even the exports have been noticed in surplus. Defence exports from the OFB ecosystem were just ₹81 crore in 2019–20. In 2024–25, exports from the new entities crossed Rs 3,500 crore, more than forty-fold increase. Government reports are that India defence exports overall were a record Rs 21,083 crore for FY 2023–24, compared to ₹686 crore in 2013–14, a 31-fold rise in ten years.
This scenario is possible because of ‘Aatmanirbharta in Defence’. India has placed import embargoes on 464 defence items, that DPSUs and private sector players are compelled to innovate and produce for domestic forces as well as international markets. MIL has been a top performer, making significant contributions to ammunition exports and niche defence equipment exports.
Recognition and Accountability of PSU
In May 2024, Defence Minister Rajnath Singh conferred Miniratna Category-I status to three DPSUs: MIL, AVNL and IOL. This status gives them greater financial autonomy, enabling them to take investment decisions more independently and speed up R&D.
In a post on X, the Defence Ministers office also shared a chart showing the growth trajectory. Since October 2021, when 41 OFB units were reorganised into seven Defence PSUs, the “corporatisation reform has delivered remarkable results,” it said.
Since October 2021, when 41 OFB units were reorganised into 7 Defence PSUs, the corporatisation reform has delivered remarkable results. From a loss of ₹2,844 cr in 2019-20 to a net profit of ₹1,625 cr in FY25, setting new benchmarks in defence manufacturing. pic.twitter.com/lQXIc1FCFz
— रक्षा मंत्री कार्यालय/ RMO India (@DefenceMinIndia) September 5, 2025
In review meetings, the defence minister Shri Rajnath Singh has always underlined that profit margins as not the aim. Rather focus is on DPSUs need to slash expenditure, spend more on research and development and prepare themselves for future technology requirements. The Ministry of Defence (MoD) has pointed out that corporatisation was done seamlessly, with no labour unrest, after having consultation with stakeholders and guaranteeing job security. This collaborative model ensured that reforms were accepted and not opposed.
Year of Reforms: 2025
The MoD has announced 2025 as the “Year of Reforms” within the defence field. The announcement marks an initiative to transform the Armed Forces into a technologically advanced, battlefield-ready force capable of multi-domain integrated operations. The emphasis lies in enhancing indigenous production, creating cutting-edge technologies and creating a strong export ecosystem. India defence production has exceeded ₹1.27 lakh crore in FY 2023–24, an all-time high, with a large contribution from DPSUs. The corporatised OFB entities are likely to contribute heavily to this momentum as well.
The seamless implementation of the reform under present government indicates that when accountability and efficiency take precedence, even legacy organizations can be realigned to address contemporary challenges.
Corporatisation of Defence PSUs: From Colonial Legacy to Global Security Partner
The corporatisation strategy is not just monetary but also it is geopolitical. The defence sector reforms in India are part of its vision to be a net security provider for the Indo-Pacific and a reliable defence partner internationally. From providing artillery shells to nations of goodwill to exporting protective equipment and precision optics, the new DPSUs are making markets where Indian defence goods were previously non-existent.
The world defence sector is being revolutionised by artificial intelligence, drone warfare, cyber technologies and space-based systems. India corporatised DPSUs need to match this drift and that is why the government is nudging them to allocate greater budgets for R&D.
Under umbrella of Aatmanirbhar Bharat partnerships with the private sector are also being fostered. Programs like the Innovations for Defence Excellence (iDEX) program have already mapped startups and MSMEs to defence production lines. The DPSUs will have to perform not only as manufacturers, but also as innovation incubators, engaging with academia, startups and private companies to provide solutions of the future.
The OFB transformation is not simply a matter of converting losses into profits but it’s a process of transforming the DNA of Indian defence manufacturing. From being an institution inherited from colonial times, designed to equip British forces, the OFB has now been redefined as competitive firms that represent India vision of self-reliance and global importance. Defence Minister Shri Rajnath Singh also pointed out in his public addresses that corporatisation of the OFB is one example of how reforms carried out with vision and inclusion can turn challenges into opportunities. The result of this reform is beyond monetary charts they are a bolder and making India more confident on the international defence platform.
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