India's defence procurement agency has cleared the purchase of 56 transport planes from Europe's Airbus in collaboration with local partner Tata Sons in a deal worth an estimated $1.9 billion, a defence ministry source said on Thursday.

The government also approved a Russian proposal to build Kamov light helicopters in India and the purchase of 145 ultra-light howitzers from the United States as part of its efforts to modernise the military.

The transport planes are intended to replace the Indian Air Force's ageing fleet of Avro aircraft. Under the bid, Airbus will supply 16 of the C295 planes in "flyaway" condition and the subsequent 40 would be manufactured and assembled by Tata Advanced Systems in India.

They would be the first military planes built by an Indian private company on Indian soil. Current manufacturing is dominated by state-run Hindustan Aeronautics.

"The defence acquisition council has given its approval to negotiate with the Airbus-Tata consortium for the transport planes even though it was a single vendor case," said a defence source who asked not to be identified in line with defence ministry rules.

Under Indian procurement rules, there must be more than one bidder for any contract in play unless it is cleared by the defence acquisition council headed by the defence minister.

The source said contract negotiations for the aircraft are expected to conclude by the end of this year.

Prime Minister Narendra Modi is seeking greater involvement of Indian companies in the defence market and to reduce the armed forces' dependence on foreign manufacturers as part of his "Make in India" programme. - Reuters