Recognising India's emergence as a strategic and economic power broker in the North East Indian Ocean region, Australia is planning to build closer defence ties with it, country's defence department said.

Years of mutual benign neglect between Canberra and New Delhi now appear to be ending. During the past 12 months, a concerted effort had been made by both countries to build the defence relationship, a department spokesperson said on Monday.

'Areas where we are seeking increased co-operation are in low-level military exercises and professional exchanges in niche areas like flying instructor training, clearance diving and (maritime) passage exercises,' she said.

India and Australia had a shared interest in enhancing peace and security in the NEIO region and plans were being developed for a big boost in bilateral co-operation expected to focus on maritime security and counter-terrorism, The Australian reported.

The government backed think-tank, Australian Strategic Policy Institute, in its special report released last week stressing the need for co-operation with India said 'several issues that trouble Australia originate from or pass through the region, such as illicit drug importations, illegal migration and terrorism.'

'Oil for Australia's key trading partners, Japan and China, passes through the Malacca Straits choke point,' the report said.

Navy-to-navy talks had been opened in January and a joint navy operations working Group held in April in New Delhi, the spokesperson said, adding joint talks would soon take place for the first time to enable better co-operation between the Indian and Australian air forces.

'That initiative could lead to increased maritime surveillance flights over the Indian Ocean to improve shipping security.'

The signing of Memorandum of Understanding by John Howard in March 2006 on defence cooperation with India marked an important first step in further developing bilateral defence ties, she said.

Australia's defence relationship with India was re-established in 2000 but limited to mostly senior-level visits and staff college exchanges.

'We are actively exploring a range of more practical service to service activities,' the spokeswoman said.

Australia is seen in New Delhi as 'something of a pale shadow of the US,' ASPI report said, adding, the country's challenge will be to break into India's crowded agenda and convince New Delhi that it is a significant, like-minded Indian Ocean power with an independent position on key regional issues.