New Delhi, April 20, 2006 (Reuters)

Top US defence contractor Lockheed Martin Corp has made two formal bids to sell about $1 billion worth of naval aircraft to India, a senior company official said on Thursday.

The bids are the latest by an American defence firm to leverage warming bilateral relations between the two countries who were on the opposite sides of the Cold War.

Under the first bid, Lockheed has offered to sell 8 upgraded US Navy P-3 aircraft to replace a fleet of vintage Russian reconnaissance planes for $550-700 million.

The other bid is for 16 multi-mission MH60R helicopters costing $350-400 million, said Royce Caplinger, head of Lockheed's Indian operations.

"It's a case of the perfect storm: the bilateral relationship, the requirement for products like ours, a budgeting process in India that is fixed and real, the money and there seems to be political will," he said.

Lockheed officials said American defence firms were buoyed by a recent landmark civilian nuclear cooperation pact between the United States and India, which they say is yet another indication of the strength of their relationship.

"We do follow our government. And, where they go, we tend to think that provides us a stable relationship that we can do business with," said Philip Georgariou, a director with Lockheed's aeronautics division in the US.

India, which has the world's fourth-largest military with a 1.3 million-strong force, is seen as a lucrative market by US firms as New Delhi is modernising its defence equipment after long years of neglect.

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The Indian government raised its defence spending by 7 per cent for fiscal 2006/07 to $20 billion as Pakistan and giant neighbour China--both of whom have fought wars with India--are seen as threats despite improved relations.

It is shopping for new fighter and trainer jets, submarines, an aircraft carrier, modern guns and radars.

India plans to buy 126 fighter jets, valued at close to $10 billion, which pits Lockheed's F-16 and Boeing Co's F/A-18E/F Super Hornet against planes from Russia, Sweden and France.

Lockheed officials said they were happy that India was looking beyond its traditional sources for the deal, the biggest fighter jet purchase by a country in recent times.

However, Indian defence experts said there was still a lot of scepticism about assured supplies of spares by US companies as they are vulnerable to shifting bilateral moods.

"We have absolutely no experience of dealing with the Americans, as against the Russians, the French or the British or even the Israelis," said Ashok Mehta, a retired Indian army major-general and defence analyst.

Lockheed officials said their company was keen to invest in India's tightly-controlled defence sector as it gradually opens up to the private sector and ultimately to foreign investment.

"It (India) has got not only a wealth of technology and capability but also the advantage of low cost of labour," Georgariou said after visiting some Indian defence facilities.

"India is not the destination for Lockheed Martin. It's the way point to the global market place," Caplinger added.