The Parliamentary Standing Committee on Defence has raised serious concerns over the state of India’s small-arms factories, highlighting weak demand, high production costs and recurring quality issues, India Today reported.

The panel warned that idle capacity and mounting losses are undermining the viability of these facilities even after their corporatisation under Advanced Weapons and Equipment India Limited (AWEIL).

Between 2015-16 and 2019-20, the factories faced little to no demand from the armed forces for their principal products.

The Army accounted for only 10 per cent of total issues during this period, leaving the factories largely dependent on orders from the Ministry of Home Affairs. These orders were insufficient to utilise the capacity of all three factories.

The committee recommended that the Defence Ministry institutionalise a multi-year, roll-on demand plan involving the Army, MHA, state police forces and AWEIL.

This would prevent factories from being left idle after sudden drops in demand. It also called for a detailed assessment of demand patterns and whether installed production capacity itself needs recalibration.

High overheads pushed up unit production costs, while issue prices were fixed below actual costs.

This resulted in cumulative losses of ₹366 crore across the three factories on 12 selected small arms between 2015-16 and 2019-20. Losses continued even after corporatisation, with AWEIL recording ₹234 crore in losses between FY 2023-24 and FY 2025-26.

The ministry informed the panel that competitive bidding and export initiatives were being pursued to reduce costs. However, the committee recommended benchmarking AWEIL’s unit costs against comparable private defence manufacturers to narrow the gap.

It also suggested exploring alternative revenue streams such as sporting and hunting rifles for the civilian market, non-lethal equipment and component manufacturing for private OEMs. Employee benefits for AWEIL’s central government staff, however, could not be rationalised.

Recurring defects were flagged during Final Acceptance Inspection, including barrel bore chip-off, low rate of fire and faults in the breech block. The committee said these defects pointed to inadequate attention to Quality Improvement Notes. It recommended a shift from end-of-line inspection to in-process quality checks, backed by a thorough mechanism to monitor compliance.

Inventory management was also criticised. As of March 31, 2020, the three factories held ₹641 crore worth of stock, equivalent to 72 per cent of their total cost of production. Work-in-progress inventory alone accounted for 56 per cent and had increased by 102 per cent between 2015 and 2020.

Store holdings exceeded the Ordnance Factory Board’s 135-day limit by between 156 and 241 days. Stronger inventory management, improved demand forecasting, cost-efficiency metrics and effective annual stock verification were recommended.

The committee welcomed AWEIL’s new R&D plan, which targets allocating 2-3 per cent of resources to research and development. However, it urged that an increased share of budgetary grants be earmarked exclusively for R&D. It also called for a proper monitoring mechanism to ensure timely completion of projects and enable AWEIL to meet emerging requirements of the armed forces.

The report has now been tabled in both Houses of Parliament, putting the Ministry of Defence under pressure to implement structural reforms aimed at improving the viability, competitiveness and quality of India’s small-arms manufacturing sector.

Agencies