Bank guarantees alone worth over Rs 300 cr had been pledged by cos since the bidding process started in 2017

NEW DELHI: A decision to cancel orders worth billions of dollars for ammunition that were to be placed on the private sector and a new process in which limited numbers are being looked at have hit the industry hard, dampening hopes of creating a domestic ecosystem to replace imports.

In a big blow to at least 11 Indian companies that were bidding to supply ammunition ranging from rifle-fired grenades, rockets, artillery shells and fuses to the army, the defence ministry has withdrawn seven tenders in June, saying bids are non-compliant without sharing specific reasons.

This has been a major cause for concern given that banking guarantees alone worth over Rs 300 crore had been pledged by the companies since the bidding process started in 2017 and several Indian entities had signed up technology transfer agreements and had even made payments to foreign collaborators.

Industry insiders have told ET that a major disappointment has been that it took over three years to decide not to go ahead with the procurement plan, without even going for field trials where they could have demonstrated their ability to deliver a range of ammunition.

The decision to issue tenders to the private sector for a 10-year supply programme was taken after surgical strikes across Line of Control in 2016, following which India spent thousands of crores on emergency purchases as tensions arose with Pakistan.

Among major companies that took part in the competition were Kalyani Group, Mahindra Defence, Premier Explosives and Solar Group. The companies had tied up with foreign partners, several of which had been earlier suppliers of ammunition being imported by India.

“It is difficult to understand why it took three years to decide that the process needs to be cancelled. For three years the companies remained tied down with banking guarantees worth crores and spent money on tie-ups and creating capacity,” an industry insider said.