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Manufacturing Small Arms and Ammunition in Private Sector

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The manufacture of arms and ammunition has been under the Govt domain which has resulted in large deficiencies, poor quality production and increasing  import dependence. With provisions of FDI and promulgation of Arms Rule- 2016 for allowing private industries, this sector is likely to evolve technologically & become self reliant…

The manufacture of arms and ammunition has always been under the Govt domain and so far regulated by the Arms Acts (1959) and Arms Rules (1962). The private industries wanted to play a strategic and leading role and were willing to invest in this sector, however, the Government never allowed them except in the manufacture of single and double-barrel and air rifles/pistols segment. In 2001-02 the DIPP obtained a decision from the Cabinet to allow manufacture of arms and ammunition in the private sector and issued Industrial licenses to few firms to manufacture arms and ammunition. But this move was short lived as the MHA seems to have objected.

Govt announced 100 % FDI in the manufacture of arms & ammunition followed by the new Arms Rule 2016 in Jul 16. The Govt decision allowing production of arms & ammunition by private sector, reflects the thrust towards building a defence industrial base and generate economic spin-offs. The relevant details of the new Arms Rule are as per succeeding paras.

Manufacture and Proof Test of Firearms

The relevant details of Arm Rules-2016 with regards to the License for manufacture and proof test of arms & ammunition are in Chapter V (Manufacturers, Arms Dealers and Gunsmiths), Part I (Manufacture and Proof Test of firearms) under Rule Numbers 51 to 66 (Page No-160-170).  Provisions for both fresh applicants and entities already holding licenses exist and now will be known as 'New Manufacturers' and 'Existing Manufacturers' respectively.

The license for 'Manufacture' or 'Proof Test' or 'Manufacture & Proof-Test' for both Arms & Ammunition shall be applied in Form VII. The licensee is required to clearly indicate the categories and description of the arms or ammunition allowed to be manufactured or proof tested or both. Separate licenses shall be issued for each unit in case of an applicant company applying for a multi-unit facility for grant of a license under this rule.

Authority to Issue License

The authority for licensing in this category is Ministry of Home Affairs (MHA) and not DIPP. This is a bit twist.

The authority to grant Industrial (manufacturing) licence has been with DIPP in most of the manufactured products requiring license including Medium and Heavy Caliber Arms and Amn.  The process of grant of IL by and large has stablised and has been running smoothly. With change in Authority for issue of License for manufacturer of Small Arms and Amn from DIPP to MHA, the issue gets complicated. More so in case of foreign tie up for investment for manufacture of small arms, will the FIPB entertain the license issued by MHA for considering the foreign partnership and investment or the industry has to seek a separate license from DIPP.

Moreover MHA has quite a bit to handle in the form of internal security issues, will it be worth while to get in unrelated area of issuing Industrial License. As it is,  in case one analyse the statics of IL applications in the past it will be observed that MHA recommendations on security aspects caused delay in considering the applicant case for grant of IL.

Category of Fire Arms

Arms for manufacture or proof test have been divided under following categories as per Rule 52:

  1. Category I - Small Arms
  2. Category II - Light Weapons
  3. Category III - Items configured for military use

Provided that if any of the items falling under category I, II or III includes any prohibited arms or ammunition, the licensing authority shall obtain the mandatory prior permission of the Central Government under section 7 of the Act before grant of a licence in Form VII.

Applications for a licence in Form VII

Every manufacturer applying for a fresh license should be an Indian company incorporated under the Companies Act, 2013 (18 of 2013). List of Documents to be submitted with application are given in Para 53 of Arms Rule 2016.

Validity

The licence granted shall be initially valid for a period of seven years within which the licensee shall be required to setup the facility for manufacture or proof test of arms and/or ammunition. Every subsequent renewal of the licence under this rule shall be granted for a period of five years.

Establishment of Facility

No manufacturing facility shall be set-up in the border areas, restricted areas or prohibited areas and any area declared as 'disturbed area' by the Central Government.

The manufacturer facilities may be setup in Special Economic Zones (SEZ), Industrial Parks and other industrial areas in addition to any other location duly approved by the State Government concerned for this purpose.

Other Requirements

Other mandatory requirements for granting license with reference to product development & design, JVs, customers, security guidelines etc. are given in Para 55 of Arms Rule 2016.

Import of Machinery for Manufacturing

The licensee shall submit an application along with the complete list of machinery to be installed, to be procured locally or imported. This requirement seems to be bit farfetched. The time to setup facility for manufacture is till 7 years as per the validity, asking List of Plant and Machinery at the time of application adds to the unwarranted paper work and can be avoided. DIPP never asked such details.

Proof Test of Firearms

A new manufacturer may set up a proof test facility for gun barrels or completed firearms, otherwise get proof tested either from the ordnance factories or other proof houses having proof test facilities.

Capacity Revision

The existing manufacturers may apply for grant of a fresh license or may apply for enhancement or restoration or revision or re-fixation of its licensed capacity with the recommendation of the State Government concerned.

Market Opportunity

The Indian inventories of Small Arms (SAs) are estimated to contain approximately 5-6 million small arms, approximately 1.6 million of these belong for Defence Forces including Coast Guard, 1.3 million to Paramilitary and 1.5 - 2 million to Police Forces. With the growing economy and private sector participation, the requirement for civil security for SAs is likely to be huge.

The army is on the lookout for better and state-of-the-art weapons for its Infantry to replace/augment its existing holdings. It plans on equipping its 362 infantry battalions, over 100 counter insurgency units and Special Forces (SF) with a modular, multi-calibre suite of small arms through imports and local licensed manufacture in one of the world's largest such contracts worth Rs 38500-44000 Crores ($7-8 Billion). In addition there will be recurring requirement of Ammunition, used for stocking and training.

The army is presently planning to acquire 44,618, 5.56mm close quarter battle (CQB) carbines to replace its outdated 9mm model and 33.6 million rounds of ammunition for around INR 20 billion. Though, two competing systems has been shortlisted for procurement i.e. the IWI's Galil ACE CQB carbine & Beretta's ARX160 model, however, the army is planning to re-tender for 5.56mm CQB carbines, as one of the two was rejected on technical grounds.

The contract floated in 2011 for the supply of 1.8 lakh Multi-Caliber Assault Rifles (MCAR) worth Rs 4,848 Crores for the Army to replace the existing INSAS rifles has been retracted. An initial 65,678 assault rifles and 4,680 under barrel grenade launchers were to be procured off the shelf for Rs 2,500 Crores. With over 1 lac more rifles to be built by the Ordnance Factory Board through technology transfer, it was the world's largest such rifle contract. This was also one of the 20 'critical requirements' for the Army. Private industries may now have the opportunity to participate in manufacture these weapons worth Rs. 5000 Crores, with the amendments in Arm Rules and can help meet domestic demand and may also enter the export market. Foreign players of this sector e.g Colt, Heckler, Kotch & IWI who had probably participated earlier for MCAR, reportedly are in talks with Indian players to setup manufacturing and even cater to export orders with present amendment both in Arms Rules and FDI Rules.

1 Response

  1. A good and an informative article!

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