Tata, Airbus sign Rs 22,000 crore contract to make military aircraft

The biggest military order placed on the private sector – a deal to manufacture new transport aircraft for the air force – has been signed on Friday. The Rs 22,000 crore deal is part of a series of initiatives to promote the private sector and break the monopoly of state owned entities in defence manufacturing.

A key decision on where to set up the manufacturing plant – 40 of the 56 C 295 transport aircraft ordered are to be built locally – is now being finalised. While locations around Hyderabad and Bengaluru are under consideration, other places under consideration could include Gujarat and Uttar Pradesh.

The Rs 22,000-crore contract has been in the works since 2012, with a push being given in the last year to see it through, after several delays. Seeing it through was no easy task, given this is the first case in which the public sector was explicitly left out to promote an alternate aerospace complex with the private sector.


Challenges that came in the way included a single vendor situation as Airbus was left as the only contender after other competitors pulled out. The ministry was also given unsolicited offers by other private sector players in recent years, promising a more economical deal. However, the ministry stayed firm on course to ensure that the pioneering contract went all the way through.

The plan to acquire 56 aircraft to replace the ageing Avro fleet also includes technology transfer to the Indian company.

The order is also expected to go up beyond 56, with requirements from the coast guard, navy and other forces expected to come in the next few years. In addition, the aircraft is also likely to be exported from India in the near future for overseas customers.