The joint bid, which was submitted only a month ago against two other bids made two years earlier, was discussed in detail at the IA board meeting on Thursday. The joint bid specifies that ATR and HAL will co-produce the 50-seater aircraft. Sources said that the IA board was tipped in favour of the joint ATR-HAL bid though no final decision on the contract was reached.

"In terms of cost also, ATR-HAL is turning out to be the lowest bid," said sources at Indian Airlines.

However, apart from cost, the key factor which has attracted IA to the ATR-HAL bid is that an Indian company will be involved in the production of the 50-seaters.

The government has impressed upon Air India and IA that foreign aircraft companies, which offer co-production agreements to Indian firms,should be preferred in aircraft acquisition contracts. The joint ATR-HAL bid was submitted just a month ago and came as a surprise to several board members.

ATR has a separate bid for the contract where it has bid alone. The only other contestant in the race is the Canadian firm, Bombardier Aerospace.IA will initially purchase six 50-seater aircraft, which will be used on short-haul and feeder routes. The 50-seater contract has been hanging fire for two years and the board of directors of IA was expected to reach a decision on Thursday. "IL&FS presented a report on the bids to the board of directors. There was debate on the methodology of calculation used. A final paper will be presented to the board in the next meeting," said an official spokesperson for IA. The IA board also discussed a report by Ferguson & Co on the merger of Indian Airlines and Air India. The report, which specified the formation of a holding company, also gave details on drawing up a notional joint balance sheet of Indian Airlines andAir India.

Board members sought further details from Ferguson & Co, the IA spokesperson said. "The merger is a big step and has to be studied in detail," he added. The final report of Ferguson & Co is also expected to be submitted at the next board meeting. Civil aviation secretary PV Jayakrishnan was present at presentation of the Ferguson report.