Ordnance factories hold ₹641 crore inventory, 56% work-in-progress

The Public Accounts Committee examined the production of small arms in Ordnance Factories (now under AWEIL) to assess efficiency, costs, and quality, which impacts the supply of equipment to the Indian armed forces and police.

Ministry of Defence (specifically Advanced Weapons and Equipment India Limited/AWEIL and its constituent factories); affects the Indian Armed Forces, Central Armed Police Forces, and State Police Forces.

• Limited demand from armed forces between 2015-16 and 2019-20, with insufficient demand from the Ministry of Home Affairs to utilize full capacity.
• Recommendation for a multi-year rolling demand plan between the Army, MHA, state police, and AWEIL to prevent idle capacity.
• Accumulation of inventory worth Rs 641 crore as of March 2020, with store holdings exceeding prescribed limits by 156 to 241 days.
• Recommendation to strengthen inventory management with cost-efficiency metrics and improve demand forecasting.
• Cumulative losses of Rs 366 crore (2015-16 to 2019-20) and Rs 234 crore (2023-24 to 2025-26) due to high production costs and issue prices fixed below production costs.
• Recommendation to benchmark costs against private manufacturers and diversify products (e.g., sporting rifles, spares) to increase revenue.
• Quality issues including 269 accidents reported by the Army (2015-16 to 2019-20) and high rates of product returns due to recurring defects.
• Recommendation to shift from end-of-line inspections to in-process quality checks and implement thorough monitoring mechanisms.
• Failure of Ordnance Factory Board (OFB) R&D projects to meet original completion dates and duplication of efforts across factories.
• Recommendation to allocate a larger share of budgetary grants for R&D and review ongoing projects to meet armed forces requirements.

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