India’s Reliance Defense, Serbia’s Yugoimport Team Up to Win $3B Ammo Contract

NEW DELHI (Sputnik) — Both companies will produce ammunition on Indian soil, which will include production through transfer of technology by the original equipment manufacturers (OEMs). The Indian government awards ammunition contracts with preference to local manufacturers or products made in India by foreign manufacturers.

"Two companies will work together in the field of ammunition, amongst others, with projected minimum requirement of $3 billion over next 10 years from Indian armed forces," the companies said in a joint statement. "In addition, there is a large requirement which is currently being met through imports and there is a potential for greater indigenization."

Last year, the Indian government cleared the private sector to produce ammunition as part of the "Make in India" program.

India's Ministry of Defense recently floated a tender for private ammunition makers in India to supply ammunition worth $3 billion to the country's armed forces over the next decade. The demand list includes 125mm armor-piercing types for T-90 and T-72, 40mm multiple grenade launcher/underbarrel grenade launcher ammo, 30mm ammunition used by armored infantry carrying vehicles, 122mm grad rockets for Pinaka series and bi-modular charge system.

Twenty-five companies, including Reliance Defence, have responded to the tender. Tender rules indicate that Indian companies can form a joint venture with foreign companies to produce such items under complete transfer of technology agreement, but the latter can't hold a majority stake in the joint venture. Indian companies will have to adopt the technology completely within five years of the signing of the contract.

Reliance Defence and Yugoimport have also planned to produce ammunition for export to friendly countries from Indian soil. Reliance Defence Ammunition will also undertake joint development of next generation ammunition to meet the future requirements of the Indian armed forces.

India currently imports nearly 50 percent of its ammunition requirements by value term, with an annual spending of more than $1.5 billion on ammunition. "With new inductions of air defence and artillery guns, this requirement is bound to increase significantly," Reliance Defence Ammunition said.

Due to shortcomings of state-owned ordnance factories, Indian armed forces face a severe shortage of ammunitions, highlighted by the country's autonomous auditor CAG in several reports. In 2015, a CAG report pointed out that the mandatory war wastage reserve of ammunition, which should be 40 days, is only for 10 percent of ammunition.