The Reagan administration, in order to avoid virtually certain defeat today of its $54 million military and police aid proposal for Central America, has agreed to cut the request in half by eliminating all military aid, according to Sen. Richard G. Lugar (R-Ind.), chairman of the Senate Foreign Relations Committee.

In a letter to committee members made public yesterday, Lugar said he would offer a compromise at the committee markup session today that would authorize $24 million to help police in El Salvador, Honduras, Costa Rica and Guatemala deal with terrorist threats. It also would authorize $1 million for a witness-protection fund.

The proposal would ban Central Intelligence Agency funding and handling of aid in the program, but would lift restrictions on "intelligence sharing and the provision of intelligence-related equipment," according to Lugar's description. It would restrict "lethal" arms aid to 10 percent of the funding, and all aid would stop if any were used for torture.

The original proposal included Panama and sought $26 million for the police counterterrorism program, $1 million for the witness fund and $27 million for counterterrorism training for the nations' armed forces.

Critics objected that the region's armed forces have received massive amounts of assistance this year, and that the Panamanian National Guard should not be helped after ousting President Nicolas Ardita Barletta in September.

"There's been no interest on either side of the Hill in military aid," a House Foreign Affairs Committee staff member said. Lugar's proposal "would reflect attitudes over here as well as the Senate side" on what kind of assistance might be approved, he added.

However, the compromise measure faces stiff opposition from some Democrats on grounds that police have used U.S. training and equipment in past abuses of human rights, particularly in Guatemala and El Salvador.

"We will continue to oppose this whole idea," an aide to Sen. John F. Kerry (D-Mass.) said.

Administration officials agreed to kill the military aid after "Lugar explained to them that it was either this or nothing," a Senate staff aide said. An amendment to restore some military aid to El Salvador may be offered as a test vote, he said.

In his letter, Lugar said failure to give any aid "runs the risk of not furnishing the region's emerging democracies with the necessary tools to counter a new and aggressive terrorist challenge."

Abuses by police and security forces responding to urban guerrilla movements in the late 1960s led Congress to impose a general ban on U.S. aid to police forces in 1974. Exceptions have been made for Costa Rica and Caribbean nations that have no armies, as well as for Salvadoran security forces, but this would be the first official U.S. aid to police units in a decade.

The measure would require the president to report on the receiving nations' progress in reducing human rights violations and creating effective law enforcement and judicial systems. The president would also have to certify that Guatemala had an elected civilian government in power and was taking steps to curb human rights abuses.

The bill would lift the 30-day limit on consultant visits to the region and permit civilian and State Department trainers to operate there, although training should be within U.S. borders "to the maximum extent practicable."