When the Indian Air Force secured the 83-aircraft contract for the Tejas Mk1A, the overall price tag broke down to approximately ₹640 crore per fighter jet.
At first glance, this headline figure has led some to mistakenly conclude that India’s homegrown combat aircraft carries an exorbitant price.
However, a deeper analysis of the defence expenditure reveals a different reality.
The actual flyaway cost—the price to manufacture the bare aircraft itself—is significantly lower, standing at an estimated $43 million (roughly ₹350 crore) according to open-source market data.
The remainder of the Cabinet-approved budget is allocated to a comprehensive package that includes taxes, spare parts, pilot training, ground support equipment, and the extensive base-level infrastructure required to sustain four active squadrons.
Understanding this breakdown is crucial because contemporary military procurement rarely involves buying just the aircraft.
Modern defence contracts are intricate, bundled deals. The Tejas Mk1A agreement incorporates crucial long-term necessities like initial lifecycle maintenance, advanced flight simulators, mission planning software, testing equipment, and provisioning for two separate airbases.
Rolling all these operational components into one overarching sum artificially inflates the perceived unit price of a single jet.
In reality, the marginal expense of rolling an additional airframe off the Hindustan Aeronautics Limited (HAL) production line remains highly competitive against its global peers.
A massive portion of this perceived price inflation is simply taxation.
Current estimates suggest that nearly 20% of the total program outlay—amounting to tens of billions of rupees—consists of the Goods and Services Tax (GST) and other domestic levies applied throughout the supply chain.
For the national economy, this is effectively a circular transfer of funds within the government's own accounts.
Yet, from a manufacturing and strategic standpoint, burying taxes inside the headline price obscures the true value of the jet and creates an unnecessary hurdle when marketing the fighter to foreign nations.
Furthermore, indigenous aerospace programs face unique financial dynamics during their early stages.
The initial batches of any new fighter must absorb the heavy costs of one-time engineering efforts, stabilizing the supply chain, and the inefficiencies of low-volume production.
As manufacturing ramps up and local vendors provide more domestic components, the cost to build each unit naturally decreases.
Securing international export orders would fast-track this cost reduction by driving up production volume, smoothing out supply chain learning curves, and spreading fixed development costs across a much larger number of jets.
Ultimately, exporting the Tejas Mk1A does not just generate foreign revenue; it directly lowers the per-unit cost for the Indian military.
To maximize the potential of the Tejas program, two primary policy adjustments are essential.
First, India must insulate its export pricing from domestic taxation.
By implementing rebates, tax exemptions, or zero-rating mechanisms for exported defence hardware, India can match the competitive pricing strategies used by established global aerospace powers.
Second, authorities must adopt greater transparency in public communications.
By clearly distinguishing the bare flyaway cost of the jet from the comprehensive lifecycle program package, officials can prevent public misinterpretation and significantly enhance the Tejas Mk1A’s standing in the highly competitive international defence market.
