* Saab-Adani to bid to build jets under India's new defence policy
* Partnership to compete with Lockheed Martin for India jet orders
* India in dire need of aircraft to replace its Soviet-era fleet (Updates with share price reaction, Saab declining comment)
NEW DELHI, Aug 31 (Reuters) - Sweden's Saab will tie up with India's Adani Group to bid for a contract to make fighter aircraft in India, an aerospace consultant aware of the proposed partnership told Reuters on Thursday.
The partnership will compete with U.S. defence giant Lockheed Martin in a two horse-race to equip the Indian military with single-engine jets to be produced locally under Prime Minister Narendra Modi's "Make-in-India" initiative.
The Saab-Adani partnership would be aimed at producing planes under India's new "strategic partnership" policy, said Ratan Shrivastava, an independent New-Delhi-based consultant and adviser at India's industry lobby group FICCI.
The partnership will likely be announced on Friday, Shrivastava said.
Saab declined to comment. Saab President and Chief Executive Hakan Buskhe will host a media event in New Delhi on Friday, Saab said in a press invitation issued on Wednesday. It did not give details.
There was no immediate comment from Adani, which is a $12 billion group with businesses ranging from energy and logistics to real estate and defence.
Shares in Adani Enterprises Ltd, a group company, rose on Thursday after the news of the planned Saab tie-up and were trading about 2.7 percent higher. Saab shares were up 1.8 percent.
Under India's new defence partnership policy, a foreign aircraft maker will collaborate with an Indian firm to develop a world-class indigenous aeronautical base that India has struggled to build for decades.
Lockheed has already picked India's Tata Advanced Systems as its local partner to produce its F-16 fighter planes that will compete with Saab's Gripen aircraft.
The government will issue a formal request to Lockheed and Saab over the next few days to provide information about their plans to design, develop and produce combat jets in India, a government official told Reuters earlier this week.
India's air force needs hundreds of aircraft to replace its Soviet-era fleet, but Modi wants the planes built in India to help boost the domestic industrial base and cut imports. (Additional reporting by Aditi Shah and Nidhi Verma; Editing by Neil Fullick and Muralikumar Anantharaman)