The Indian Government has paved the way for foreign private investments in the defence sector with the clearance to build a military transport aircraft that would replace the air force’s Avro aircraft fleet.

The Defence Acquisition Council (DAC) has cleared the acquisition of 56 transport aircraft for the Indian Air Force (IAF).

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Under the terms of the Rs130bn ($2.1bn) project, the foreign original equipment manufacturer will supply the initial 16 aircraft, while the remaining 40 will be manufactured by an Indian production agency (IPA).

"The foreign original equipment manufacturer will supply the initial 16 aircraft, while the remaining 40 will be manufactured by an Indian production agency."

The foreign companies can establish units in the country but the majority stake needs to remain with the IPA.

India sent requests for proposals (RFPs) in 2013 to Illyushin, Antonov, Alenia Aermacchi, Saab, Boeing, Lockheed Martin, and European consortium EADS among others.

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However, the decision to allow private investments was stalled then due to opposition from within the government.

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The bid submission date for the project has now been extended to 28 August to give time for the foreign players to select a domestic partner.

Indian Defence Minister Arun Jaitley told The Times of India that the project would help make the Indian private sector ‘a player’ in aircraft manufacturing and lead to domestic ‘capacity-building’.

As well as the IAF project, the DAC cleared the purchase of five fleet support ships for the Indian Navy at a cost of Rs90bn ($1.4bn) and five offshore patrol vessels for Rs20bn ($331m).

Also, 32 advanced light helicopters worth Rs70bn ($1.16bn) were approved for the navy and the coastguard.

Defence Technology