The deal is expected to further boost growing defence ties between India and the US. The new helicopters are meant to replace the military's ageing Soviet-origin helicopters.
“Both have been cleared, the total cost is $2.5 billion,” a defence ministry source told Reuters after the Cabinet Committee on Security (CCS) cleared the deal.
Modi’s visit to the US is aimed at drumming up investments into India. He will leave for the US on Wednesday to attend the UN General Assembly.
Many in the defence sector had expected the deal, pending since 2013, to be signed during US defence secretary Ashton Carter’s visit in June this year. The two sides have finalised cost negotiations.
The deal for the Apache is "a hybrid one", with one contract to be signed with Boeing for the helicopter and another with the US government for weapons, radars and the electronic warfare suite.
The US has been pushing for this contract as it will bolster American presence in India’s lucrative defence market. US companies have bagged defence contracts from India worth around $10 billion over the last decade, including those for P-8I maritime surveillance planes and C-130J Super Hercules and C-17 Globemaster-III transport aircraft.
The helicopter deal survived over 10 price extensions from the American side, with the last one being for a month.The contract will include clauses for follow-on orders for 11 more Apaches and four more Chinooks. Both helicopters have been used in combat in Afghanistan and Iraq and had beaten off competition from Russia, which offered the Mi-28N Night Hunter and Mi-26 heavy lift helicopters.
The 22 Apache AH 64D Longbow is one of the most advanced multi-role combat helicopters, featuring all-weather and night fighting abilities. It can track up to 128 targets in less than a minute and engage 16. It also has stealth characteristics, advanced sensors and beyond-visual-range missiles.
India is also expected to acquire Hellfire missiles and rockets for the helicopters.