By Nandan Mandayam

Feb 17 (Reuters) - The ePlane Company, an Indian electric aircraft startup, said on Monday it has agreed to supply 788 air ambulances in a deal valued at more than $1 billion, at a time when the country is grappling with worsening traffic congestion in busy cities.

Under the non-binding agreement, it will supply the electric vertical takeoff and landing (eVTOL) aircraft to ICATT, an air ambulance service provider, which plans to deploy them across all districts in India.

EVTOLs are seeking to revolutionize urban travel by developing battery-powered aircraft, which can take off and land vertically, giving commuters a chance to avoid traffic snarls.

India's nascent eVTOL market also includes companies such as Archer Aviation ACHR.N and Sarla Aviation.

ePlane is targeting commercial operations by the latter half of 2026, with an initial production of 100 units a year, its founder Satya Chakravarthy told Reuters in an interview.

"We can ramp up our production and put things into the market to good use much more effectively with an air ambulance than directly going to an air taxi," Chakravarthy said. "It's possible for us to ramp up air ambulances a lot more organically, compared to having to go to a rush with an air taxi."

The aircraft would have an initial range of about 110 kilometres (68.4 miles), which can later be increased to more than 200 kilometres.

ePlane, which has raised $20 million so far from investors, will look to start with three prototypes of the ambulances, accommodating a pilot, a paramedic and a patient, along with a stretcher.

Chakravarthy, a professor at the Indian Institute of Technology-Madras, where his startup is incubated, said another $100 million would be required to manufacture more prototypes in other forms, achieve type certification and begin commercial production.

(Reporting by Nandan Mandayam in Bengaluru; Editing by Shilpi Majumdar)

((Nandan.Mandayam@thomsonreuters.com; Mobile: +91 9591011727;))