Introduction:

The Ministry of Home Affairs (hereinafter referred to as the “MHA”) has amended the Arms Rules, 2016 (hereinafter referred to as the “Parent Rules) vide notification G.S.R. 1342(E) dated October 27, 2017, and has subsequently brought into force the Arms (Amendment) Rules, 2017 (hereinafter referred to as the “Amendment Rules).[1] The Amendment Rules have been liberalized to boost “Make in India” manufacturing policy of the Government as well as to promote employment generation in the field of manufacturing of arms and ammunition.

Applicability of the Amendment Rules:

The Arms Rules, 2016, have been amended to define “existing manufacturers” to mean any manufacturer holding manufacturing license under the Arms Rules, 1962 or under the Industrial Development (Regulation) Act, 1951. Therefore, the Amendment Rules shall now apply to licenses granted by MHA for small arms & ammunition and licenses granted by Department of Industrial Policy and Promotion, under powers delegated to them, for tanks and other armored fighting vehicles, defence aircrafts, space crafts, warships of all kinds, arms and ammunition and allied items of defence equipment other than small arms.

Validity of Licenses

The Amendment Rules now state that licenses granted to licensee companies for manufacture of arms are now valid for life-time of the company.  The requirement of renewal of the license after every 5 years under Rule 54 (2) of the Parent Rules has been done away with.

 However, the life-time validity of the license is subject to the following conditions:

  • The licensee shall be required to setup the facility for manufacture or proof test of arms and/or ammunition, recruit technical and administrative staff, develop and proof test proto-types of arms and ammunition, conduct trial runs and any other activity related to the setting up of the facility for the manufacture or proof-test of arms and ammunition, within a period of seven years from the date of grant of a licence
  • The licensing authority may extend the period of seven years by a further period of three years, on the basis of a written representation received from the licensee.
  • If during the period of seven years or the extended period of three years, the licensee fails to setup the manufacturing or proof-test facility or is unable to take other operating steps required for starting commercial production, the licence shall be suspended or revoked.

Sale and export of small arms and light weapons:

The Parent Rules had prescribed that small arms and light weapons produced by manufacturers would be sold to the Central Government or the State Governments with the prior approval of MHA. However, this condition has been done away in the Amendment Rules. However, the rules with respect to export of small arms and light weapons remains the same, i.e., they may be allowed for export subject to the approval of MHA in consultation with the Ministry of External Affairs, Ministry of Defence and Ministry of Commerce, on a case to case basis.

Enhanced production:

The Amendment Rules have introduced a new provision with respect to enhanced annual production of firearms and ammunitions by a licensee company, wherein licensee companies will be permitted to have enhanced production capacity up to 15% of the quantity approved under licence by giving only prior intimation to the licensing authority in this regard.

License Fees:

The licence fee for manufacture of arms has been reduced significantly. The previous licence fee was INR 500 per firearm which added up to very large sums and was a deterrent to seeking manufacturing licenses. The licence fee will now range from INR 5,000 to the maximum of INR

50,000. Further, the fee for manufacturing licence shall be payable at the time of grant of license rather than at the time of application.

Takeaway:

The Amendment Rules have been relaxed considerably to encourage manufacturing of arms. The provisions of doing away with renewal of licence every five years, allowing increase in capacity up to 15 % without prior permission and introducing a one-time licence fee is envisaged to encourage investment in the manufacturing of arms and ammunition and weapon systems in the country, and hence will generate more employment in this field. The liberalized Rules are expected to encourage the manufacturing activity and facilitate availability of world class weapons to meet the requirement of Armed Forces and Police Forces in sync with country’s defence indigenization programme.[2]