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India awards Airbus US$1.9 billion military plane order

[NEW DELHI] India's defence ministry has agreed to buy 56 planes from Airbus for US$1.87 billion, as Prime Minister Narendra Modi moves to modernise the country's military, an official said Thursday.

The ministry's defence acquisition council, which approves big ticket orders, agreed Airbus and India's Tata Advanced Systems would jointly build military transport aircraft to replace an ageing fleet.

The deal for the C295s worth 119.30 billion rupees (US$1.87 billion) was agreed late Wednesday by the council along with other orders worth US$875 million, the defence ministry official told AFP.

"The council has approved a joint bid by European giant Airbus Defence and Space and Tata Advanced Systems to supply the Airbus C295s," the official said on condition of anonymity.

India is in the middle of a major upgrade of its Soviet-era military, partly to keep up with neighbouring rival Pakistan and big-spending China.

Since coming to power one year ago, Modi's government has approved a string of military projects that had stalled under the previous left-leaning Congress government, in part over corruption scandals.

Modi, a hardline nationalist premier, wants to end India's status as the world's number one defence importer and to have 70 per cent of hardware manufactured domestically by the turn of the decade.

His government lifted the cap of foreign investment in defence to 49 per cent last year.

The council last year deferred approval of the project for Airbus, which was the sole bidder.

Under the project proposal, Airbus would build 16 twin-turboprop aircraft in "fly-away condition", while Tata would assemble the remaining 40 in the southern Indian city of Hyderabad in a technology transfer.

Other orders approved include 145 BAE Systems ultra-light artillery howitzers, Indo-Russian BrahMos cruise missiles for six warships and 197 Russian Kamov helicopters, the official said.

The council, chaired by Defence Minister Manohar Parrikar, also set up a committee to work out the details for the already agreed purchase of 36 Rafale fighter jets from France.

During a visit to France last month, Modi announced India would buy 36 Rafale planes in a deal estimated to be worth five billion euros (US$5.5 billion) following tortuous years-long negotiations.

But the purchase agreement fell a long way short of previous proposals for India to buy 126 of the jets made by French firm Dassault. Frustrating negotiations for that deal stalled over costs and assembly guarantees.