India’s two much-hyped joint ventures (JVs) with Russia are floundering over costs, flawed planning and overreach on achieving 'atmanirbharta' in the military sector.
m.thewire.in
A Russian AK-103 Assault Rifle, from which the AK-203 rifles are derived. Photo: Burnyburnout/Wikimedia Commons CC BY-SA 3.0
The JV to implement the project followed an Inter-Governmental Agreement (IGA) that was signed soon after in which the OFB had a 50.5% stake in IRPL, the Kalashnikov Group 42% and Russia’s state-owned arms export agency Rosonboronexport, the remaining 7.5%.
The intent was for IRPL to import some 100,000 AK-203’s for around $ 1,100 (Rs 81,000) apiece to meet the army’s urgent operational needs, followed by the licensed production of the remaining 650,000-odd units. Almost immediately, un-reconcilable price differences and technology transfer issues emerged, which industry sources said could not be resolved even during defence minister Rajnath Singh’s recent Moscow visit in September. This, in turn, led to the MoD instituting a ‘Costing Committee’ in September to try and resolve the ‘unreasonable and unacceptable’ rifle contract price reportedly being demanded by Russia. For now, it’s not clear whether this committee’s report has been submitted to the MoD, and if so, what has been the outcome. But the reality is that the Ak-203 deal remains unsigned and the bulk of the IA continues to operate the inefficient INSAS rifles while frontline units employed on counter-insurgency operations (COIN) are dependent on imported weapons.
The Russians were also reportedly demanding a royalty of $200 per Ak-203 rifle produced by the JV, making it an astronomical licence fee of $130 million for 650,000 units, in addition to the cost of erecting the plant, the bulk of which would be borne by OFB. The JV is expected to annually produce 70,000 Ak-203’s, initially from knocked-down kits and later by localising components and sub-assemblies to indigenise production to further the governments Atmanirbhar Bharat initiative.
But contractual problems did not end here.
The OFB is believed to have costed each licence-built Ak-203 rifle initially at around Rs 86,000, amortised over time to average around Rs 80,000 per unit. Embarrassingly, in comparison the import of a repeat import order for 72,400 assault rifles from the US-based Sig Sauer in early 2019 and late 2020, to meet the IA’s urgent operational needs, was considerably cheaper.
Official sources revealed that Sig Sauer’s SIG716 rifle priced at $990 (Rs 72,782) each in 2018 had emerged as L1 or lowest bidder in response to the IA’s tender, besting rivals Israel Weapon Industries and Abu Dhabi’s Caracal International that quoted $1600 and $2000 for their ACE-1 and CAR 817 assault rifles respectively.
Why not go for manufacturing SIG 716 rifles in India in the first place?