In the present study halotolerent  indigenous strain of Azospirillum lipoferum N-29  was isolated on modified Congored Nitrogen free agar with 6% NaCl concentration from the hyper saline soils of Kolhapur district of Maharashtra, India. It was identified as by using Bergey’s manual of systematic bacteriology Williams et, al.,(1989). To study its nitrogen fixing ability acetylene reduction assay was performed as per Dobereiner (1997), as well as a pot experiment was carried out on sugarcane 8071 variety,  which is cultivated on large scale in western Maharashtra region of India. Nine pots divided in to three sets. Set-1 labelled as control set seeded with sugarcane setts without any treatment. Set-2 seeded with sugar cane setts soaked in Azospirillum lipoferum N-29 in sterile soil. Set-3 seeded with sugar cane setts soaked in Azospirillum lipoferum N-29 one set each pot in normal hyper saline soil. For production of biofertilizers a biomass production experiment was carried using fully automatic bioreactor, using a modified Nitrogen free broth medium at 30°C temperature,pH7.0, 140rpm agitation. Results indicated that Azospirillum lipoferum N-29 strain grows up to 8% NaCl concentration with optimum 4 % NaCl concentration, pH 7.0, temperature 30^OC and at 140 rpm. It tolerates about 12% NaCl salt concentration for 1 hour. Nitrogen fixing ability Results indicated that there was maximum nitrogen fixation (22%) observed at 30^OC temperature , 4% NaCl salt concentration, at 140 rpm agitation and at pH 7.0. Pot experiment showed that there was 58% increase in height of plant, diameter of stem, number of setts, and number of leaves as compared to control set and 20 % increase in sterile soil with Azospirillum lipoferum N-29, this indicated the combine effect of other microorganisms with that of Azospirillum lipoferum N-29.Biofertilizer production experiment indicated that maximum biomass (4*10⁹ cells ml^-l ) can be produced within 48 hours at 30^OC and at 140 rpm using modified Nitrogen free broth medium with 20% sucrose.My study indicated the suitability of Azospirillum lipoferum N-29 strain as a candidate for biofertilizer production for saline soils as well as for reclamation of saline soils.