Bangalore (Agencies): As ‘violent disturbances’ in the neighbourhood pose security threat to the country, Government on Wednesday vowed to rapidly modernize the armed forces saying that the defence expenditure was certain to rise in the coming decades.

Inaugurating South Asia's biggest air show Aero India 2011 at Yelahanka Air Force Station here, Defence Minister A K Antony said the IAF's USD 11 billion Medium-Multirole Aircraft
(M-MRCA) deal comprising 126 planes was likely to finalised in the next fiscal.

"India has always been a votary of peace. Yet, violent disturbances in our immediate and extended neighbourhood pose security challenges for our nation and the region as a whole,"
Antony said.

Antony said, "Our current defence expenditure -- 2.5 per cent of its GDP, is consistent with our projected security requirements and is bound to increase over the next two decades".

M-MRCA decision on merits

With countries pushing hard to support the bids of their companies M-MRCA deal, he said the decision to award the tender will be based on merits.

"The decision will be based on merit only.... There will be no political decision in defence acquisition process including the M-MRCA. As far as India is concerned, there will be no political decision and interference in defence acquisition process," Antony said when asked about reports suggesting that the US was asking India to award the M-MRCA contract to one of its companies.

Two American aircraft -- Lockheed Martin's F-16 and the Boeing's F/A-18 E/F along with European Eurofighter, Swedish Gripen, French Rafale and Russian MiG-35 are in the race for the deal for 126 fourth generation combat aircraft.

Heads of state of all the countries have visited India in the last one year and pitched for the bids submitted by their companies. The list includes US President Barack Obama, British Prime Minister David Cameron and French President Nicolas Sarkozy.

Antony said the decision to award the contract was likely to be taken in the next fiscal.

Tejas to be inducted in ’12

Five units of home-grown Light Combat Aircraft (LCA) Tejas, recently given initial operational clearance, stole the show with breathtaking vertical loops and mid-air manoeuvres, demonstrating their aerial agility and quick manoeuvrability.

Antony said the indigenous Light Combat Aircraft 'Tejas' will be inducted into the IAF by 2012 and its advanced version will be ready for operational service by the end of 2015.

"LCA Tejas Mk-I would be ready for induction by 2012. The LCA Mk-II would take another three years and would be inducted by 2015," he told reporters.

Transfer of Technology

The Minister said the government was considering a proposal to include transfer of technology as offsets under the procurement policy and expand their scope to a few other sectors.

The offsets clause mandates reinvestment of at least 30 per cent of the worth of deals above Rs 300 crore into Indian defence, aerospace and internal security sectors.

"It is expanded to three sectors now but we feel that there is scope for some more sectors. There is a proposal for transfer of most modern technology as offsets; it must be also be included," he said when asked if the government would accept transfer of technology as offsets under its procurement policy.

Antony said the Defence Ministry has appointed a committee under the Director General, Acquisitions to hold discussions in this regard with all the stakeholders including the DRDO, the three Services and the industry and a final decision in this regard would be taken by the Defence Acquisition Council (DAC).

"Some other major companies have recently entered the fray. This is a positive and an encouraging development. We are open to Joint Ventures, public-private partnerships and
licence production under transfer of technology for the all-round development of the
aerospace industry", he said.

"We are encouraging our public and private sector industries to become active partners in this initiative. I am sure that leading international aerospace companies will form long-term partnerships with the Indian industry", he said.

Exquisite flying display

Aero India 2011 took-off on an impressive note with an exquisite flying display and mid-air manoeuvres by Indian and foreign aircraft and an impressive flypast at the biennial, five-day event.

Boeing's F/A-18 Super Hornet, France's Rafale and Swedish Saab Gripen and Italian Typhoon also put up superlative flying displays at the aero show.

Antony said compared to the 2009 edition, international participation has gone up by 25 per cent, with over 40 foreign delegations participating at this year's Aero India.