Is the Option Exercise in the Ordnance Factory DPSUs an Acid Test of Corporate Leadership? – Indian PSU

OPINION PIECE By C. Srikumar, General Secretary, All India Defence Employees Federation (AIDEF)

The forthcoming option exercise for employees of the erstwhile Ordnance Factory Board, now working in the seven Defence Public Sector Undertakings (DPSUs) created after corporatization, may appear to be an administrative process on paper. In reality, it could emerge as one of the most significant tests of trust, leadership credibility and employee confidence since the restructuring of India’s defence production ecosystem.

Across the world, institutions rarely fail because of flawed strategies alone. More often, they falter when employees stop believing in the strategy, lose faith in the institution and eventually lose confidence in the leadership. It is against this backdrop that the upcoming absorption option exercise assumes extraordinary importance.

The exercise follows assurances given by the Government before the Madras High Court in the case filed by AIDEF and subsequent commitments made by the Cabinet Secretary in the National Council of the Joint Consultative Machinery (JCM). These assurances enabled defence civilian employees who were placed on deemed deputation in the seven DPSUs to continue as Central Government employees until retirement.

The central question today is simple: if employees are ultimately given a choice, how many will voluntarily choose to be absorbed into the new corporate entities?

The answer may reveal far more than employee preferences regarding service conditions. It may provide a direct assessment of the confidence that employees have in the future of the seven DPSUs and in the leadership entrusted with guiding them.

Beyond Salary and Job Security

At first glance, one may assume that employees prefer to remain Central Government employees because of job security, pension benefits or the anticipated gains from the forthcoming 8th Central Pay Commission. While these factors undoubtedly matter, they do not tell the entire story.

Many employees are also asking deeper questions. Is the leadership of the DPSUs competent enough to steer the organizations through an increasingly competitive defence manufacturing environment? Do the managements genuinely care about the workforce? Can employees rely on corporate leadership to honour commitments made today? Is the future of these companies secure in a rapidly changing defence sector?

These questions cannot be answered through presentations, circulars or official assurances alone. They are ultimately answered through trust.

Every employee who opts for absorption would, in effect, be expressing confidence in the future of the corporate model. Conversely, every employee who declines absorption would be signalling a preference for the certainty of Government service over the promises of corporate management.

A Leadership Test

The option exercise is therefore not merely about employment status. It is an evaluation of whether the leadership of the seven DPSUs has successfully carried its employees along on the transformation journey.

If a significant number of employees decline absorption, difficult questions will inevitably arise. Why were the Chairmen and Managing Directors, Directors (HR) and Boards of these companies unable to convince employees about the merits of the corporate structure? Why has employee confidence remained elusive despite several years of corporatization?

In my view, employees had made their position clear from the very beginning.

All employees of the Ordnance Factories, including the IOFS officers, have already conveyed their preference to continue as Central Government employees on deemed deputation until retirement, as assured by the Government before the Madras High Court.

Despite sustained efforts by both the Government and DPSU managements, the absorption package offered by the companies has failed to inspire confidence among employees.

The Trust Deficit

The issue goes beyond service conditions.

Many employees remain unconvinced about the long-term future of the seven DPSUs. They view Government policy as increasingly favouring private participation in defence production while requiring the DPSUs to compete under market conditions.

The Government has opened the defence production sector to private corporates and is actively encouraging them through policy support and incentives. At the same time, the seven DPSUs are expected to compete with these private players in the marketplace.

According to employees, this competitive environment has translated into increasing work pressures. In the name of competitiveness, standard man-hours required for production have been reduced, leading to greater workload and stress without corresponding compensation. Workers are expected to deliver more with fewer resources while continuously facing pressure to improve productivity.

The managements often project a positive picture of corporate performance, but employees on the shop floor experience a different reality. It is this disconnect that has contributed significantly to the trust deficit.

When workers are being asked to tighten their belts while they perceive management structures remaining unaffected, questions naturally arise regarding fairness, transparency and shared accountability.

More Than an Administrative Outcome

If a large majority of employees refuse absorption, the outcome should not be viewed merely as a preference for Government service.

It would also represent a collective expression of dissatisfaction with the corporatization model itself.

Many employees believe that the future existence and sustainability of these companies remain uncertain under the present policy framework. Consequently, the likely outcome of the option exercise may reflect not only the desire to retain Government employee status but also a rejection of the corporatization decision.

The Government of India is aware of these sentiments. Therefore, when the option exercise concludes, the results should be studied carefully for the message they convey.

Listening to the Employees’ Verdict

The option exercise offers a rare opportunity to measure employee confidence objectively. Unlike surveys or consultations, employee choices in this exercise will carry direct personal consequences and therefore reflect genuine sentiment.

Wise leadership in both the Government and the DPSUs should not treat the outcome as a routine administrative exercise. Instead, they should analyse what employees are trying to communicate through their choices.

If employees overwhelmingly choose to remain Central Government employees, the verdict would indicate that significant trust-building remains to be done. More importantly, it would suggest that employees continue to have reservations about the corporatized structure and its long-term future.

In my view, the Government should seriously reconsider the corporatization decision. In the interest of national security and strengthening indigenous defence production, there should be a re-examination of the policy framework. The Government should engage with employee representatives and examine alternative proposals aimed at improving, expanding and modernising the Ordnance Factories within a Government-owned structure.

The forthcoming option exercise is therefore much more than a choice between two service conditions. It is a referendum on trust, confidence and the future direction of India’s defence manufacturing ecosystem.

The verdict of the employees will not merely determine their employment status. It will send a message about how the workforce views corporatization, corporate leadership and the future of the seven DPSUs.

Views expressed here are those of C. Srikumar, General Secretary, All India Defence Employees Federation