Airbus and Tata team up to bid for Indian aircraft deal

By Tommy Wilkes

NEW DELHI (Reuters) - Tata Sons and Europe's Airbus have bid for a multi-billion dollar contract to replace the Indian Air Force's ageing fleet of Avro cargo planes, as New Delhi looks to boost the role of the local private sector in modernising its armed forces.

Under the bid, estimated by analysts to be worth at least $2 billion, Airbus' Defence and Space unit and Tata's Advanced Systems would replace the 56 Avro jets with Airbus' C295 transport planes, the European manufacturer said on Tuesday.

Airbus would supply the first 16 planes in "fly away" condition from its own assembly line, while the subsequent 40 would be manufactured and assembled by Tata Advanced Systems in India.

They would be the first military planes built by an Indian private company on Indian soil, with current manufacturing dominated by state-run Hindustan Aeronautics.

Prime Minister Narendra Modi's new government, which has raised the foreign investment limit in defence since coming to power in May, is moving to clear a backlog of military equipment orders and close the gap on strategic rival China.

It has said it will prioritise companies which have pledged to manufacture within India.

Indian companies such as Tata, Larsen & Toubro and Mahindra Group are spending billions of dollars to build arms, as they look to win a chunk of the $250 billion that analysts estimate India will spend on defence kit over the next decade.

The government first issued a tender for a foreign supplier and Indian private firm to replace the Avro jets in May 2012, but a lack of interest from potential bidders and ministerial infighting led to a series of delays.

India is trying to replace much of its outdated fleet of military planes. The biggest contract is a $15 billion deal with France's Dassault Aviation to buy 126 Rafale fighter jets, which is still to be finalised.

(Reporting by Tommy Wilkes; Editing by Biju Dwarakanath and Mark Potter)