Defence aircraft maker Hindustan Aeronautics Ltd has invited bids to build a new design and manufacturing complex in Bangalore for MMRCA fighter planes.
The facility is estimated to cost Rs 360 crore and is to be completed two years from the award date.
The IAF is acquiring at least 126 MMRCAs (medium multi-role combat aircraft) to modernise its ageing and depleting fleet.
The MiG-21 fighters are to be phased out from 2014. The Navy is also expected to top up the order.
The tender for the new production unit comes even as the Government's Contract Negotiation Committee is negotiating the cost of procuring the fourth-generation fighters with the finalist vendor, France's Dassault Aviation.
HAL plans to locate it at Challaghatta where it has large tracts of land. The integrated ‘green' factory complex will include hangars, runways and residential units.
The area is close to the old international airport, which was closed to commercial flights in May 2008.
The HAL defence airport continues to operate military, VVIP, charter and select non-scheduled flights into and out of Bangalore.
The Ministry of Defence said in February this year that a Contract Negotiation Committee had started negotiations with the L1 MMRCA bidder, France's Dassault.
This was for its lower price over the European Eurofighter consortium for its Typhoon. Dassault — if and when an agreeable price is reached in the coming months and the contract is sealed — will directly supply 18 Rafale MMRCAs to the IAF.
HAL will build the remaining 108 aircraft. It will be its first export of Rafale, which has also been used in Afghanistan and Libya.
The MMRCA acquisition is said to be this century's largest and most keenly watched defence purchase contest.
The order is estimated at a minimum of around Rs 50,000 crore ($10 billion)
Also in the race were Boeing IDS (F/A-18 Super Hornet); Lockheed Martin (F-16IN Super Viper); Sweden's Saab (JAS 39 Gripen) and Russia's RAC MiG (MiG-35).