DAC Clears AK-203 Rifle Deal with Russia Ahead of Putin Visit

Foreign Affairs

New Delhi: In a major step forward in Indo-Russian defence cooperation, the Defence Acquisition Council (DAC) chaired by Defence Minister Rajnath Singh cleared the deal for the manufacture of AK-203 assault rifles in India with Russian partnership with the contract set to be formally signed next month when Russian President Vladimir Putin is scheduled to visit India.

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The DAC cleared all deviations in the deal, which has brought the cost down. The two countries came to an understanding about the cost and supply factor for the 7.62×39 mm chambered rifle, for which formal negotiations began in 2018. The contract subsequently went for legal vetting and underwent more changes.

Under the deal, the first 20,000 AK-203 rifles, which will be the mainstay of the armed forces, replacing the 5.56×45 mm INSAS (Indian Small Arms System), will be imported from Russia at a cost of about $ 1,100 (or Rs 80,000) per piece depending on the conversion rate.

Then, more than six lakh rifles are to be manufactured in India as part of a joint venture — Indo-Russia Rifles Private Limited — established between the Indian Ordnance Factory Board (OFB), Kalashnikov Concern, and Rosoboronexport, the Russian state agency for military exports. While the OFB has a 50.5 per cent stake in the joint venture, Kalashnikov has 42 per cent and Rosoboronexport 7.5 per cent.

India’s priority was to bring down the cost as also transfer of technology (TOT), sources said. They said the Russians have let go of royalty for each rifle manufactured in India, but Moscow will be paid for TOT.

According to the original plan in 2018, the production of the AK-203 would have already begun at the Kalashnikov manufacturing unit in Amethi, the foundation stone for which was laid by Prime Minister Narendra Modi in March 2019.

The deal, however, hit a roadblock over price negotiations, with the OFB quoting a higher price than what a direct import from Russia would have cost. This was because of the extra man hours it would take to build these rifles in India, cost of setting up the factory with all the machines, and the absorption of the TOT. The defence ministry had even constituted a committee to break this logjam.

The delay had forced the Army to order SiG716 rifles from the US, under a fast-tracked process, to arm its frontline troops. The Army also went in for a follow-on order of similar numbers, and now frontline troops are equipped with this rifle.

Incidentally, in August this year, the Indian Air Force had gone in for emergency procurement of 70,000 latest AK series of assault rifles. So while the original 2018 plan was to directly import 20,000 AK-203 rifles and jointly manufacture 6.5 lakh of them in India, the IAF deal meant that more of the rifles had to be bought off the shelf.

However, the initial order is only for the three defence Services. The joint venture will eventually get orders from various state police and central armed police forces.