India's state-run Hindustan Aeronautics announced plans to set up a defense enterprise with Rolls-Royce, a world leader in the manufacturing of airplane engines.

The joint venture will make HAL, which has headquarters in Bangalore, the sole manufacturer and supplier of shroud rings for engines used by Boeing and Airbus. Production is expected to begin by 2012 and both HAL and Rolls-Royce will have each invested a stake of $4 million.

"This (deal) marks an exciting new phase of our long-standing partnership with HAL and underscores our commitment to India and the aerospace industry here," Rolls-Royce Chief Executive Officer John Rose said in a statement released by HAL. "India is a country that is full of potential for Rolls-Royce and we look forward to continuing to develop our business here in the future."

Rolls-Royce, which has headquarters in Derby, England, and HAL are already partners in the production of the Adour Mk 871 engine used for the Hawk Trainer Jet. An order of 66 such trainer jets has been contracted by the Indian air force.

"Construction of a new purpose-built production facility, incorporating the latest in modern manufacturing techniques, will commence in 2010 with component production beginning in 2012," said HAL Chairman Ashok Nayak.

The production will center on the manufacturing and supply of shroud rings for Trent series and V2500 RB211 engines. Company officials, also, indicated that the factory to be built will be stationed at an HAL location.

All but 10 percent of the engines that HAL manufactures are intended for Indian defense purposes.

In a related development, Rolls-Royce announced plans to team with India's largest engineering company, Larsen and Toubro, to make components and provide services for light water nuclear reactors globally.

The move is part of the Indian company's designs to expand its outreach "as more than 60 percent of civil nuclear power plants use Larsen and Toubro-made reactors," India's Economic Times reported this week.

Rolls-Royce has a nuclear-certified supply chain of more than 260 companies worldwide, providing advice and technical support to government and reactor operators in Europe and the United States.

For Larsen and Toubro, however, to be able to offer services worldwide it will have to enact enabling legislation, including the country's nuclear liability bill.

Still, the plan is in line with a nuclear cooperation agreement between India and the United Kingdom that enables industries in the two countries to engage in civil nuclear commerce, Larsen and Toubro said in a statement.

India's atomic capacity is expected to jump 10-fold by 2035.