Defense Secretary Richard B. Cheney yesterday announced a sharp cutback in the Army program to develop a new-generation attack and reconnaissance helicopter.

Reducing the planned annual production of the aircraft from 216 to 120 raised the projected cost of each helicopter from $7.5 million to $8.9 million, the Army said. The cost of the Light Helicopter program is now estimated to be $34.2 billion for 1,292 vehicles, compared with $42 billion for the larger original buy plan of 2,096.

Cheney said the demonstration phase of the program will be extended two years to allow for full testing of a prototype.

Earlier this year, the House Armed Services Committee said the end of the Cold War required a reevaluation of the Army's helicopter requirements, taking into account that future war scenarios would not likely be against Soviet armed forces in Central Europe. The committee authorized $300 million for a new "Scout Attack Helicopter" that would complete the prototype work.

The Senate did not terminate the Army program, but denied full-scale development funds. The effect was similar in that the Senate action would keep the helicopter in the prototype research stage for now.

The Light Helicopter is expected to replace an aging fleet of AH-1 Cobra, OH-58 Kiowa and OH-6 Cayuse attack and scout helicopters.

The new helicopter is designed to perform reconnaissance at night, in bad weather, at high altitudes and in hot climates, the Pentagon said. It will be able to fly to operating bases that are beyond range of current helicopters.

Two corporate teams are competing for the production contract. -- McDonnell Douglas Helicopter Co. of Mesa, Ariz., and Bell Helicopter Textron of Fort Worth, Tex., plus Boeing Helicopters of Philadelphia and United Technologies' Sikorsky Aircraft Co. of Stratford, Conn.