The Union Cabinet on Thursday cleared Indian Airlines' plans to purchase 43 aircraft from Airbus Industrie. This was stated by Finance Minister P Chidambaram who spoke to reporters on the decisions taken at the Cabinet meeting.

The public sector carrier would now be formally asked by the government to place orders for a mix of A-319s, A-320s and A-321s with the Airbus Industrie, official sources said.Prime Minister Manmohan Singh had approved the deal after it was cleared by the empowered Group of Ministers earlier this month after reducing the total price tag by over Rs 349 crore (Rs 3.49 billion).

The prime minister had announced the clearance of the deal in the presence of his British counterpart Tony Blair at the India-EU summit on September 7.

After hectic negotiations between the government and the Airbus Industrie, the deal amount was reduced by 3.4 per cent to peg the entire contract at Rs 9,890 crore (RS 98.9 billion). Airbus had earlier quoted Rs 10,237 crore (Rs 102.37 billion) for delivering 43 planes -- 19 A-319s, four A-320s and 20 A-321 planes.

As per the tentative delivery schedule, the first aircraft will join the fleet in the second half of next year and the remaining 42 would be inducted at an average rate of one plane per month.

Besides the price discount several other concessions and advantages have also been gained in the deal.

These included the establishment of an ultra-modern training centre for pilots to fly Airbus family of aircraft at a cost of around $75 million, an MRO (maintenance, repair and overhaul) facility at a cost of $100 million and a counter-trade offer worth about $145 million, the sources said.

The Airbus Industrie also assured the government in writing that it would establish spare part warehouses in India, not only for IA but for other carriers as well.

Though these concessions did not quantify in monetary terms, they would bring in lot of additional investments and facilities by aircraft and engine manufacturers.

Two rounds of negotiations were held with Airbus Industrie and engine manufacturer CFM -- first with the Oversight Committee headed by former Comptroller and Auditor

General C G Somaiah and then with the empowered Group of Ministers, headed by Finance Minister P Chidambaram.

In the last round of negotiations held directly by the public sector carrier in March this year, the IA had already obtained a saving of $63.2 million.

Government would also get an "integrity clause" -- a guarantee for a clean and transparent deal, and the "most favoured" clause incorporated in the agreement.

Alliance Air, IA's wholly-owned subsidiary, would be getting five A-319s to replace its aged Boeing 737-200s by January next year.