Continuing in its efforts to modernise its armed forces the Cabinet cleared the proposal to purchase 490 MICA missiles from French firm MBDA at an estmated cost of Rs 6,600 crores ($1.25 b).

The Cabinet Committee on Security (CCS), chaired by Prime Minister Manmohan Singh, passed the deal as part of a previously-announced package to upgrade India's 51 Mirage 2000 planes, a senior ministry source said.

The cabinet had earlier approved the overall upgradation package of Mirage jets by French firms Dassaut and Thales at a cost of $2.4 billion. Two aircraft are being upgraded in Farnce and the remainder will be refitted in HAL Bangalore.

The firm is contract bound to plough back 30% of the contract value in Indian defence industries as part of the deal.

India is also expected to decide shortly between rival bids from France's Dassault and the Eurofighter consortium for a $12 billion 126 fighter jet deal. Two contenders remain in the reckoning Dassault's Raphale and the EADS 'Typhoon' Eurofighter.

The contract is for the outright purchase of 18 combat aircraft with another 108 to be built in India with options to acquire more.

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