The Defence ministry has signed a deal with Airbus Defence and Space of Spain worth ₹ 20,000 crore on Friday.
Under this deal, India will procure 56 C-295 medium military transport aircraft which will replace Avro-748 planes in the Indian Air Force.
Sixteen planes shall be delivered by Airbus within 48 months of signing the contract.
The remaining 40 shall be manufactured in India by an association of Airbus Defence and Space and Tata Advanced Systems Limited (TASL) within 10 years of signing the contract, officials said.
This is the first time military aircraft will be manufactured in India by a private entity.
All 56 aircraft will be installed with indigenous electronic warfare suite.
The ministry had also said that before the new aircraft are delivered, a servicing facility for the C-295 aircraft will be installed in the country.