More than the price, the hope on DRDO delivering the indigenous AWACS might be the key reason, not to mention that DRDO surely lobbied against additional Phalcons, to focus attention to their developments, we have seen similar tactics in several projects.
And I highly doubt DRDO's plans are that much cheaper, since they aim on large platforms too with A330 class aircrafts, while you could go for Boeing 737 or Airbus A320 class aircrafts at lower costs too. I still see the MTA as a logical choice for AWACS India, since it should meet the performance requirements of IAF, is larger than the EMB 145 platform and should easily carry a rotodome, but most of all would be an indigenous platform, that can be produced and modified according to our needs. Why procure a foreign platform and ask the vendors for costly modifications, when you have an own choice?