Bangalore: Japanese firm Mitsubishi Heavy Industries (MHI) will set up a plant in Mysore to manufacture small diesel engines, in joint venture with Bangalore''s VST Tillers Tractors Ltd, with whom the Japanese company has had a joint venture since 1965.

According to the statement, the current annual demand for diesel engines (below 50 hp) in India is over five lakh units. The JV will introduce a range of lightweight, compact and high RPM engines.

The joint venture would manufacture, sell and service diesel engines with displacements in the range of 640cc to 1,760cc, under license from MHI. These advanced technology engines would be sold in India and neighbouring countries under Mitsubishi''s brand name.

A T Nahender, director of the MHI-VST diesel engines joint venture said in a statement, the plant would have a capacity to manufacture 30,000 units by next May, in the first phase of the project, which is estimated to cost Rs41.5 crore.

The company says MHI and VST would provide its customers with a offer to buy-back, which would place the venture on a strong footing.