Russia and India will create a new 50-50 joint venture (JV) for the production of multirole transport aircraft (MTA) to serve the air forces of both nations.
The Russian Government has allocated funding for its share of the project, while Hindustan Aeronautics Ltd (HAL) will take care of India's share.
The estimated $600m JV will produce a highly advanced transport aircraft capable of carrying 20t of payload and landing on any type of runway, including in high Himalayan altitudes.
The transport plane will be based on the Ilyushin Il-214 aircraft and will extend India's BrahMos cruise missile project.
The Indian Air Force has recently shown interest in acquiring 40 MTA aircraft for transporting troops, military hardware and military cargo with option of buying more aircraft, while the Russian Air Force has confirmed plans to acquire 100 planes.
HAL and Ilyushin will together design and develop the aircraft.