"The CCS meeting chaired by Prime Minister Manmohan Singh cleared the proposal for purchase of the planes from the US through the Foreign Military Sales (FMS) route," Defence Ministry officials said here.
Under the deal, the US defence major Boeing, the manufacturer of the aircraft, will have to invest 30 per cent of the contract amount for setting up defence facilities in India, they said.
As per the procurement procedure, offsets clause entails that a vendor winning a defence deal worth over Rs 300 crore has to reinvest at least 30 per cent of the deal amount in Indian defence, homeland security or civilian aerospace sectors.
The deal, which amounts to over Rs 18,000 crore, would be the biggest-ever defence contract to be entered with the US.
Prior to this, the biggest deal with the US was worth USD 2.1 billion for procurement of eight P-8I maritime surveillance and anti-submarine warfare aircraft from Boeing through direct commercial sales in 2009.
Boeing, along with another US company Lockheed Martin, had recently failed to qualify in a bid for procurement of 126 Medium Multi-Role Combat Aircraft (MMRCA) for the IAF, which had upset the Americans. The MMRCAs are likely to cost India over USD 11 billion.
Washington had, however, then said that strategic ties with India would not be overshadowed by exclusion of the two American companies from the Indian fighter contract and the bilateral defence dialogue between the two nations would work on enhancing cooperation in cutting edge technology.