The government has decided to buy 126 French-made Rafale combat aircraft for the Indian air force, clinching a massive $11 billion defence deal, a top official said Tuesday.

The French aviation company Dassault snapped up the $11 billion deal after emerging with the lowest bid in a two-way competition against the Eurofighter Typhoon aircraft, the official said.

Planes from Boeing Co. and Lockheed Martin of the United States and from Russian and Swedish makers were dropped from consideration earlier.

The deal is the first foreign deal for Dassault's fighter jets. The deal would be a huge shot in the arm for Dassault, which has struggled to find a foreign buyer for the multi-role Rafale, billed as one of the most effective fighters in the world but also one of the most expensive. The company's shares soared almost 21 percent on Tuesday.

India, the world's biggest arms importer, is being wooed by major international arms manufacturers as it replaces its obsolete Soviet-era weapons.

Eighteen fighter aircraft will be delivered in ''fly away'' condition within 36 months and the remaining 108 are to be built by state-owned Hindustan Aeronautics Ltd. through technology transfers.

Defence ministry experts were still fine-tuning pricing details, including the cost of on-board weaponry and royalties for producing the aircraft in India.

"The French firm Dassault Rafale has emerged as the L-1 (lowest bidder) and cheaper than its european rival EADS (maker of Eurofighter) in the tender and will be offered to supply the aircraft to the IAF," the source said.

They said the representatives of Dassault here were informed about the development in the morning and further negotiations on price will be held with them in the next 10 to 15 days.

Six companies including American F-16 and F-18, Russian MiG 35, Swedish Saab Gripen alongwith Eurofighter and Dassault Rafale were in the race in the beginning.

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