India is preparing to sign major contracts worth several crores of Rupees in the next fiscal year beginning April, including those for 114 Rafale fighter jets, 60 Medium Transport Aircraft (MTA), ‘Tejas’ Light Combat Aircraft, and Airborne Early Warning and Control Systems (AEW&CS).
The Ministry of Defence (MoD) informed the Parliamentary Standing Committee on Defence that the Indian Air Force (IAF) was allocated an additional 37.03% funds in the military capital budget for the financial year 2026-27 that would be utilised for signing these big ticket contracts.
“There is an increase of 37.03% in the Indian Air Force’s capital budget as compared to budget estimates for 2025-26,” the MoD said, in response to questions from the parliamentary committee on its priority areas for capability development, considering the budgetary allocation for FY27.
“The allotted funds are planned to be utilised against some of the major new schemes like MRFA (Multi Role Fighter Aircraft for which Rafale is the chosen platform), combat enablers (such as the Tejas and AEW&CS), MTA, and medium-altitude long-endurance RPA (unmanned aerial vehicles such as the General Atomics’ MQ-9B), in addition to the ongoing committed liabilities,” the MoD told the parliamentary panel, according to a report tabled in Parliament last week.
“Keeping in view the modernisation of the armed forces, especially during the current geo-political scenario, the committee urges the air force to gainfully utilise the allocated funds for modernisation and technological upgradation in armament and in the procurement of other vital platforms,” the parliamentary panel recommended in its report.
In February 2026, the MoD’s highest decision-making body, the Defence Acquisition Council (DAC), had approved Acceptance of Necessity (AoN) for major military systems worth Rs 360,000 crore, including the Rafales, the first step towards these purchases.
The Rafale purchase alone is expected to cost Rs 325,000 crore. The contract cost would be paid to the aircraft manufacturer, French firm Dassault Aviation, in phases. At contract signing, Dassault Aviation would be paid 15% of the cost of the 114 aircraft, followed by deferred payments as the contract is executed over the next five or six years.
The deal is still far away, as the procurement procedure would go through various stages such as tendering, technical evaluations, and cost and contract negotiations, before finally being approved for signing by the Indian government’s Cabinet Committee on Security, the highest decision-making panel headed by Prime Minister Narendra Modi.
Under the Rafale procurement plan, India would buy 18 of these 4.5-generation combat jets in fly-away conditions, while the remaining 96 would be assembled in India through a partnership between Dassault Aviation and an Indian manufacturer.
India is also negotiating a localisation plan for the Rafale jets through the integration of domestically made weapons, electronic suites, and IAF-specific enhancements on the aircraft.
Under the MTA procurement plan, India seeks 60 new transport aircraft for the IAF to boost its airlift capabilities and would soon go to the DAC for Acceptance of Necessity to begin the tendering process.
In the MTA project, the competition to bag the contract has heated up among key contenders, such as the American Lockheed Martin’s C-130J Super Hercules with 20-tonne capacity, Brazilian Embraer’s K-390 Millennium with 26-tonne capacity, and European Airbus Defence and Space’s A-400M with 37-tonne capacity.
India planned a ‘Make in India’ project for the MTA procurement on the lines of the previous C-295 procurement, won by the Airbus-Tata Advanced Systems Limited (TASL) combine, and is currently being assembled in India at a plant in Gujarat.
While Lockheed Martin now has a Memorandum of Understanding with TASL for bidding in the MTA tender, as the two companies already have a joint venture for the C-130J systems manufacturing in Hyderabad. Embraer has teamed up with Mahindra to bid for the contract. Airbus is yet to find an Indian partner for the programme.