The government has constituted a panel to hold negotiations with Airbus Industrie, the aircraft maker that bagged the deal to sell planes to Indian Airlines.

The negotiation committee, which will be headed by a secretary-level official, will hold negotiations with Airbus on various issues. According to sources, the committee will also try to bring down the cost of acquisition from Rs 9,475 crore (Rs 94.75 billion) -- the maximum price approved by the Public Investment Board recently.

Besides bringing down the price of aircraft, the government also wants changes in the counter purchase agreement with the companies bagging the contract.

As per the original plan, companies bagging the contract from the Indian Airlines were to counter purchase at least 30 per cent of the contract value from Indian companies.

According to government sources, the government will look at increasing this to at least 40 per cent. If a consortium of companies, including aircraft makers, aircraft service providers and aircraft engine makers, gets the project, each party will have to undertake counter purchasing to the tune of 30 per cent of their contract value from India.

According to sources, this has been done to ensure that the companies, which win the contract, will invest back in India in terms of setting up their own facilities or give contracts to Indian companies.

Sources also pointed out that it would not be mandatory for the aircraft maker to source the counter purchase from a government company or agency.

They may also be allowed to outsource various works to Indian companies or even be allowed to set up their own centres for that purpose.

To raise Rs 9,475 crore, the government is expected to depend on external borrowings mainly, with over 90 per cent of the funds coming from outside the government funding.

Indian Airlines plans to buy 43 aircraft, a mix of Airbus 319s, 320s and 321s.

The Indian Airlines board had approved the proposal for the first time at its meeting in March, 2002. Subsequent to which, the government had asked the airline to reconsider the proposal as the market condition has changed considerably since the decision.