Russia [Images] on Thursday said it was in 'advanced' negotiations with India on a $10 billion deal to provide the country with an anti-missile and a fool proof air defense system encompassing the whole geographical area.

"We have made major breakthroughs in the S-300 anti-missile sheet and have demonstrated the effectiveness of the system to the Indians," Vyatcheslav Dzirkaln, heading a high-level Russian defense delegation, said in New Delhi [Images].

He said, "The system on offer will encompass coverage of the entire country plus regional grids and our system is much more sophisticated and better than the American Patriot PAC-3 system."

Dzirkaln said the Russians had also made an offer of upgrading India's ageing Pechora air defense system based on the old Russian SAM-6 and SAM-7 technology along with a proposal to upgrade 700 T72 main battle tanks. He also disclosed that India and Russia had finalised an agreement on the supply of SMERCH long-range multi barrel rocket system, which has a capability of hitting targets within a range of 60 km.

"An agreement was reached at the year end for supplying to regiments of SMERCH MRPL systems ranged in army," Dzirkaln said.

Though Russian officials refused to quote the price on the SMERCH deal, sources said the purchase was worth $550 million. Nikolai A Makarovets, Director General, SPLAV SRPA, manufacturers of SMERCH, said the deal had gone through after exhaustive trials undertaken on the Indian soil and that delivery of the systems will start by this year-end.

Terming India as the major partner of Russian arms exports worldwide, Dzirkalan said deals worth $10 billion were under various stages of consideration between the two countries.

"These relate to air defense systems, transport helicopters, sea borne Kamov-31 helicopters as well as other systems," he said.

On the T-90 tank deal, he said India could produce as many as 1,000 main battle tanks under license. Under the deal signed in 2001, Russia supplied 140 completely built T-90 tanks and 186 in semi knocked down and fully knocked down conditions for assembling in Heavy Armament Factory in Avadi.

On the vexed issue of supply of spares for Russian front line equipment in the armed forces, Dzirkalan said the move to set up specialised servicing centers in India had already started with three such stations coming up in Mumbai, Vishakapatnam and Goa [Images].

The supply of spares formed the thrust of discussions held with top Indian officials, including the Defense Secretary Shekhar Dutt and Secretary Defense Production K P Singh, he said, adding that more such centers would come up this year.

On the upgradation of T-72 M tanks, Dzirkalan said that Rosoboron Export, which was the original manufacturer of the tanks, along with Beltek Expo of Belarus and ELOP of Israel, remained in contention.

India is proposing to upgrade 700 of the main battle tanks, providing them with night fighting capabilities and placing short-range surface-to-surface missiles on them. Russia has also proposed a deal for upgradation of BMP-II infantry combat vehicles.

On the delivery of Naval MiG 29K jet fighters, Dzirkalan said delivery of the planes will take place simultaneously along with handing over of the aircraft carrier Admiral Groshkov to India in 2008.