Mahindra & Mahindra Ltd has obtained a licence from the government to produce small arms and associated ammunition. This, according to sources in the company, has been done in anticipation of a large order from the armed forces.

"We have reasons to believe that a tender for small arms is likely to be floated by the government," the sources said adding, "We will put in our bid once the government comes out with the tender."

This is the first licence handed out by the government for making arms and ammunition in the private sector after the defence sector was opened up by the National Democratic Alliance government a few years ago. Sensing the new business opportunity, Mahindra & Mahindra had set up a separate division, called Mahindra Defence Systems, in mid-2000.

Mahindra & Mahindra has told the government that the proposed project will be set up in the states of Maharashtra and Andhra Pradesh. Commercial production would start within 12-18 months of receiving the order.

The sources emphasised that the fate of the project would depend crucially on the company receiving the order. "The investment in the facility only makes sense if we are allowed to participate in the procurement. Otherwise, who do we sell to?" the sources said.

It is also likely that the company will source the technology to produce firearms and ammunition from a foreign company. When asked what would be the investment in such a project, the sources said it could be "fairly large".

If the project takes off, this will be the third line of business for Mahindra Defence Systems. At the moment, it provides end-to-end services in areas of IT and military vehicles to the three services and the paramilitary forces. Mahindra & Mahindra has been selling its multi-utilility vehicles to the armed forces for almost five decades now.

Over 8,000 of Mahindra & Mahinda MUVs are already in service with the Indian security forces and the company is extending its range to variants like double-strecher ambulances, weapons carriers, rapid intervention vehicles, water trucks, light logistic carriers and station wagons.

Going great guns

• This is the first licence handed out for making arms and ammo in the private sector
• Commercial production would start within 12-18 months of receiving the order