An investigation by DefenseNews found major aircraft makers -- including Boeing and Lockheed Martin -- have little interest, at least so far, in the $3 billion tender issued last month by the Indian government.
Also, no Indian company has teamed up with a foreign company to consider tendering for a replacement for the twin-engine Avro, some of which were inducted into the military in the 1960s, DefenseNews reported.
The government strategy is to widen the domestic military aviation manufacturing base away from reliance on state-owned Hindustan Aeronautics Limited. HAL has enjoyed a near monopoly in the aeronautics manufacturing sector.
But lengthy delays on many projects have strengthened the argument for another major aircraft manufacturer.
Yet the domestic defense companies have failed to ink a single tie-up with a major overseas aviation contractor as they find the idea uneconomical, Indian defense company executives told DefenseNews.com.
At the end of May, the Indian air force issued a global tender for 56 replacement aircraft.
Manufacturers EADS CASA of Spain, Alenia Aermacchi of Italy, U.S. firms Boeing and Lockheed Martin, Antonov Design Bureau of Ukraine, Ilyushin Design Bureau of Russia and Embraer of Brazil received tender documents.
The tender calls for 16 of the planes in fly-by-wire condition to be bought directly from the foreign supplier and 40 will be built under license in India.
DefenseNews reported a Boeing executive acknowledged the company had received the tender but no decision on it had been made.
A Lockheed senior executive said the company is evaluating the tender and wouldn't comment on whether it would partner with Tata Advanced Systems, with whom it already has worked in India.
When approached by DefenseNews, a spokesperson for Tata Advanced Systems said it doesn't comment on tender issues.
Part of the problem may be the numbers of aircraft are not sufficient for economies of scale.
A senior executive with Larsen & Toubro told DefenseNews unless India doubles the number and awards a 25-year maintenance contract to the Indian partner, the project doesn't appear viable.
"The long-term benefit of the project lies in creating an alternative industrial entity to HAL," said Laxman Kumar Behera, a research fellow with the Institute for Defense Studies and Analyses.
"However, this again has a major challenge. India doesn't have a big defense budget to sustain two aircraft companies. To make the matter even worse, India also doesn't have a defense export policy to reap the benefits of economies of scale."
When India approved the tender in last July, Airbus Military with its C295 and Alenia Aermacchi with the C-27J were expected to be the front-runners for the contract, Flight Global reported at the time.
Whichever foreign company wins, working with a private Indian company would be a major first for India's aviation sector, Flight Global reported.
Meanwhile, the air force is considering upgrading the Avro, the news website IndianDefense.com reported last month.
The upgrade could extend the life of the Avro for another decade, unnamed air force sources told IndianDefense.
The upgrade, by a domestic supplier, might include radar enhancements, an auto-pilot system, improved communications and better avionics.
India's first Hawker Siddeley 748M Avro were bought from the United Kingdom and later aircraft were made under license by Hindustan Aeronautics Ltd.