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The Economic Times

Indo-Russian joint venture for Amethi rifles factory hits hurdle

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The order to manufacture a record 670,00 Kalashnikov AK 203 rifles for the Indian Army has been discussed for more than a year.
LUCKNOW: The Indo-Russian plan to make assault rifles in Amethi has faced a setback with the joint venture (JV) failing to arrive at an offer price, given complexities of technology transfer and setting up of production facilities.

The JV could not agree on a competitive offer price to the Army that would also meet requirements of indigenisation, said people aware of the matter. The lack of agreement could push back the project as commercial offers are essential before the formal contract is filed.

However, the people said, the project could still take off before the end of this year once the issues are resolved. As per original plans, the factory was to commence work by May this year. This would be pushed back until the JV sorts out the cost issue.At the heart of the matter is the larger issue that plagues Make in India. While the assumption is that Indian made products will be cheaper, the initial setting up of new weapons facilities is cost intensive, pushing up the cost of domestically manufactured arms. In most cases, the cost of Indian made arms is 25-50% higher in the initial stage than imported items. However, the costs can be brought down in the long run by mass production and pursuing export opportunities.
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The determination of both sides to achieve 100 % indigenisation is leading to escalated costs that have to be brought down, said one of the persons, who spoke on condition of anonymity. This would require concessions from both the original equipment manufacturer, Kalashnikov, and its Indian partner, the Ordnance Factory Board. The order to manufacture a record 670,00 Kalashnikov AK 203 rifles for the Indian Army has been discussed for more than a year but the formal order has yet to be placed owing to delays in submission of technical and commercial bids.
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