Panel flags high expenses as defence PSU incurs Rs 234-cr loss in 3 years

In a report tabled in both Houses of Parliament on Wednesday, the committee said it reviewed three weapon-manufacturing factories under AWEIL and found that “post-corporatisation, the cumulative loss for the three factories from financial year 2023-24 to 2025-26 stood at Rs 234 crore”.

The committee noted that AWEIL’s small-arms factories operate with high overhead costs, driving up unit production expenses. The MoD told the committee that, prior to corporatisation in 2021, these financial burdens were borne by the government.

The ministry added that competitive bidding and strategic pricing were being used to secure new orders, and that AWEIL was working continuously to improve productivity and reduce overheads, including staffing and supervisory costs, while competing for orders from the armed forces and Central Armed Police Forces (CAPFs).

The report highlighted a key concern, stating that “high fixed overheads render the factories uncompetitive when demand declines”.

The committee suggested that, as AWEIL now functions as a defence PSU, the ministry must bridge the cost gap and make the ordnance factories more competitive vis-à-vis private defence manufacturers.

The committee further noted that AWEIL employees were Central Government employees and that it was not feasible at present to rationalise or reduce their service-related benefits.

To increase revenue, the committee suggested that AWEIL explore the production of sporting and hunting rifles for the licensed civilian market, non-lethal riot-control equipment and components for private-sector companies.

The committee also urged the ministry to focus not only on scaling up production, but also on improving quality standards at small-arms factories to revive their performance.

In this regard, it noted that inadequate quality checks have downstream effects, including delays in deliveries. It recommended establishing a robust monitoring mechanism to ensure compliance with revised quality-control directives.

The report also observed that the factories have been operating below capacity, resulting in underutilisation of production facilities. It said these capacities could be better utilised if orders from the armed forces were received on a more continuous basis.