At $43 million each, the Tejas Mark 1A competes in the export market

On Wednesday, the Ministry of Defence (MoD) announced the Union Cabinet’s clearance for Hindustan Aeronautics Ltd (HAL) to build 83 Tejas Mark 1A light combat aircraft (LCA) for Rs 45,696 crore. This raised concerns that the improved version of the current Tejas Mark 1 fighter would cost a daunting Rs 550 crore each.
However, senior government sources have clarified to Business Standard that each Tejas Mark 1A will cost no more than Rs 315 crore to build, with the total manufacturing cost adding up to Rs 26,145 crore.
Graphic: Tejas cost breakdown
1. Basic cost of 83 fighters: Rs 26,145 crore
2. ADA consultancy charges: Rs 800 crore
3. Maintenance running list of spares: Rs 8,000 crore
4. Technical training schools: Rs 600 crore
5. GSE/GHE: Rs 1,202 crore
6. Central taxes: Rs 9,000 crore
TOTAL (about) : Rs 45,696 crore
The balance of the Cabinet clearance includes allocations for tax and for maintenance and support infrastructure in the two operational airbases that will be home to the four squadrons of the Tejas Mark 1A.
Of the Cabinet’s total allocation, government taxes and levies constitute about 20 per cent, or about Rs 9,000 crore. Effectively, the Ministry of Finance will be appropriating a large chunk of the defence budget through taxing an indigenous weapons platform.
In major arms manufacturing countries, such as the USA, defence equipment and weaponry is exempt from excise and sales tax.