NEW DELHI — India will rely on domestic firms to develop and build its first unmanned combat aerial vehicle (UCAV), similar to the Predator drone built by US-based General Atomics.

The state-owned Defence Research and Development Organisation (DRDO) will fund 80 percent of the development and prototype cost for the Rustom-2 UCAV, with the remaining 20 percent paid by private Indian defense companies.

This is the first time DRDO has invited private companies to develop prototypes under their guidance.

In doing so, the Defence Ministry is reversing its decision to build Rustom-2 using only DRDO and state-owned Hindustan Aeronautics Limited (HAL), an MoD source said.

A MoD source said the Rustom-2 project was being funded by the government because the private companies had been lukewarm about building prototypes at their own expense and then have to compete for the project.

In this category, the government funds up to 80 percent in the development of the prototype, while the remaining 20 percent is funded by the selected private development agency, the MoD source said.

"[The] category is a suitable economic proposition to ensure greater involvement of private sector companies in developing defense projects, which is now being encouraged by the new government," said defense analyst Nitin Mehta.

An executive with domestic defense major Larsen & Toubro (L&T) said the MoD has agreed to commit to an unspecified number of Rustom-2 UCAVs, and L&T would like to participate in the project because the government would also fund the development of the prototype. "The financial commitment in the Rustom-2 looks promising now," the executive added.

India began its Rustom-1 UAV in 2006 and initially wanted participation by domestic defense companies. However, after the MoD failed to give firm commitments of orders to the selected company, none of the defense companies from the private sector participated. HAL then became the production agency.

Weighing 1,800 kilograms, Rustom-2 will have a payload of 350 kilograms, and a flight endurance of up to 48 hours. The two 100-horsepower engines will be capable of flying up to 36,000 feet with a range of 100 kilometers.

The development cost of Rustom-2 is estimated to be around $200 million.

India's domestic private sector defense companies including L&T, Tata Power SED, Mahindra Defence System, Data Patterns India Pvt. Ltd. and Bharat Forge Ltd. All are likely to be frontrunners to compete for the Rustom-2 project.

The MoD source added that Rustom-2 is a tri-service requirement with initial order of 75. The cost of each Rustom-2 would be around $5.83 million.