An unnamed National Assembly official said the government earmarked the money for either the Joint Air-to-Surface Standoff Missile from Lockheed Martin or the Taurus, an air-launched missile manufactured by Taurus Systems in Germany.
Lockheed Martin's JASSM system can be launched from F-15Ks, F-16Ks and other advanced jet fighters after system integration, the Herald report said.
"JASSM is much cheaper and easier to integrate with the existing fleet of American aircraft," the source said. "But South Korea may have no alternative but to choose the Taurus if the U.S. Congress continues to delay the authorization for the export of JASSM."
Another government source said the unit cost of JASSM was about $1.06 million each, where as that of the Taurus was around $2.5 million when Seoul requested quotations in 2009, the report said.
The same unnamed source said the missiles are needed to counter unprovoked attacks from North Korea.
"It can be fired from Seoul and hit any targets in Pyongyang, including North Korean leader Kim Jong Il attending a massive military parade or other ceremonies, by using its GPS-aided inertial navigation system," he said.
However, purchase will need U.S. administration approval.
"If the Pentagon issues the Letter of Offer and Acceptance early next year, we plan to assess the two air-to-surface guided missiles over their performance, price and the extent of technology transfer and select the winner no later than September 2012," a senior military official told the Herald.
If the LOA is forthcoming, Seoul could deploy the first weapons in late 2013, he said.
Last month, the air force announced it will attempt to upgrade core software for its guided missile system deployed mainly against North Korean ballistic missile threats, the Defense Acquisition Program Administration said.
The software is for installation at the Master Control Report Center within the central air base in Osan, Gyeonggi province.
South Korea uses Patriot Advanced Capability-2 missiles and also medium-altitude Hawk missiles.
DAPA is in talks with the U.S. government over the software upgrade, for which Washington wanted $13.3 million, a report in the Herald said in November.
"The air force has reached a conclusion that it can upgrade the software with its own technology accumulated through the project to enhance the Master Control Report Center system," said a DAPA official, declining to be named.
The upgrade cost is expected to be about 14 percent of what the United States wanted for its software upgrade, he said.
"Should we commission the U.S. side to upgrade the software, we have to hand over the core MCRC equipment to them, which apparently causes concerns over any technology leak. But we removed such a possibility (by doing it ourselves)," he said. "We also expect the amount of time for the upgrade to decrease by some nine months."