India and Britain are set to sign the $1.7 billion Advanced Jet Trainer deal, senior government officials said on Friday.
The AJT and other recent deals will make the Atal Bihari Vajpayee government's spending on defence procurements the highest in Indian history and could make it a contender for the title of the world's biggest buyer of defence items.
According to defence ministry officials, the AJT negotiations have almost been concluded and the deal could be signed in the next day or two.
"We are through [with the negotiations]," a source close to the deal said.
Under the deal, the Indian Air Force will get 24 Advanced Jet Trainers manufactured at British Aerospace facilities in the UK. Another batch of 42 AJTs will be produced at the Hindustan Aeronautics Limited facility in India.
After the Cabinet Committee on Security cleared the deal with BAE Systems on September 30, 2003, a new hurdle over accounting cropped up, delaying the signing of the agreement.
Officials say the defence ministry's failure to correctly work out the cost of setting up HAL facilities for indigenous production of AJTs have now been overcome.
The AJT is among the various multi-billion dollar defence purchases sanctioned by the Vajpayee government. Sources say since payments for these deals are spread over a few years India could technically claim to have not spent the most this year on defence purchases.
But that is just a technicality.
On January 17, the Cabinet cleared the Rs 2,800 crore (Rs 28 billion) deal for the Admiral Gorshkov aircraft carrier. Though it is denied officially, sources say the government has already cleared a deal to lease Russian nuclear submarines and Tupolov-22 long-range strategic bombers along with the Gorshkov.
India has also finalised a $1.5 billion deal for the purchase and transfer of technology for Scorpene submarines from France.
In coming days, the Indian Army will select a supplier for new generation howitzers that are currently being tested. This deal is expected to be worth around $1.5 billion.
India is also pushing to get the Arrow ballistic missile defence system from Israel.
In 2001, India had signed a $2 billion contract for military technology transfer from Israel, including assistance in MiG-21 upgrades. The country is finalising almost two dozen items for its special forces from Israel. Almost an equal number of equipment for the special forces is being procured from the US.
In 2000-2001 India spent Rs 120 billion on defence purchases. In 2001-2002, it spent Rs 162 billion and in 2002-03 the defence budget was hiked 14 percent.
According to a senior defence ministry official, the government will spend some $100 billion over the next 20 years if the present strategy is carried forward.