India's defence procurement agency has cleared a proposal to buy 145 M777 Ultra Lightweight Howitzer artillery guns from BAE Systems in a deal worth an estimated $750 million, a defence ministry source said on Saturday.

Under the deal, 120 of the 145 guns will be assembled in India, said the source, who asked not to be identified in line with defence ministry rules.

Prime Minister Narendra Modi wants to upgrade the country's military hardware by replenishing its range of artillery weapons after years of delays in ordering new equipment.

But Modi wants deals with foreign companies to include the setting up of factories and plants in India to boost the local industry.

BAE said in February it had chosen Indian conglomerate Mahindra Group to build a plant for the assembly of Howitzer artillery guns it hopes to sell to India.

The source said the proposal would soon be communicated to the US, where BAE manufactures the weapons.-Reuters