Modi Government Approves Deemed Deputation Till Retirement for OFB Employees, 62,000 Defence Civilians Benefit – Indian PSU
In a significant decision impacting thousands of defence civilian employees, the Government of India has approved the continuation of deemed deputation till retirement for employees of the erstwhile Ordnance Factory Board (OFB) who do not opt for absorption in the seven newly formed Defence Public Sector Undertakings (DPSUs).
The decision was approved by the Empowered Group of Ministers (EGoM) on June 11, 2026, and communicated through an Office Memorandum issued by the Department of Defence Production, Ministry of Defence, on June 15, 2026.
The move brings long-awaited clarity and relief to nearly 62,000 employees of the former OFB who have been serving on deemed deputation since the corporatisation of 41 Ordnance Factories into seven DPSUs with effect from October 1, 2021.
No Compulsory Absorption
According to the Ministry’s order, all eligible employees of the erstwhile OFB will be offered a common absorption package prepared by the seven DPSUs. However, employees will have the freedom to decide whether they wish to be permanently absorbed in the new corporations.
Importantly, the Government has approved that employees who do not exercise the option for absorption shall continue on deemed deputation to the DPSUs till their retirement. This effectively rules out any possibility of compulsory absorption into the corporations.
Central Government Service Conditions to Continue
The Office Memorandum further states that employees remaining on deemed deputation will continue to be governed by all extant rules, regulations and orders applicable to Central Government servants. These include pay scales, allowances, leave, medical facilities, career progression and all other service conditions.
The decision is viewed as a major safeguard for employees who had expressed concerns regarding the preservation of their service status and benefits following corporatisation.
Extension of Existing Deemed Deputation
To facilitate completion of the absorption option process, the Government has also extended the existing deemed deputation arrangement up to March 31, 2027, with effect from October 1, 2026.
Fulfilment of Assurance
Employee representatives have welcomed the decision, describing it as the fulfilment of assurances given by the Government during legal proceedings challenging the corporatisation of the Ordnance Factories.
The issue had been consistently raised by employee federations, particularly the All India Defence Employees Federation (AIDEF), which maintained that employees should not be compelled to surrender their status as Central Government employees.
The latest Government order is expected to end years of uncertainty among the defence civilian workforce and provide stability to employees while ensuring the smooth functioning of the newly formed DPSUs.
"This decision is a historic victory for the employees of the erstwhile Ordnance Factory Board. From the very beginning, AIDEF maintained that no employee could be compelled to give up his or her status as a Central Government employee. The Government's decision to allow deemed deputation till retirement for those who do not opt for absorption has vindicated our stand and brought long-awaited relief to thousands of defence civilian employees and their families for which AIDEF filed WP in Madras High Court and got verdict in our favor. We now want the government to issue orders for compassionate appointment to the dependents of the deceased employees. Moreover, our fight for withdrawal of Corporatization also will continue," said an elated C. Srikumar, General Secretary, AIDEF.
