Monday, December 24, 2012

India, Russia sign defence deals worth Rs. 22,000 crore

 It was about ten days back that Russian conglomerate Sistema had warned India that a lack of progress in the dispute over telecom licences would put bilateral relations between the two countries at risk.

This threat has, however, fallen flat.

India and Russia today signed defence deals worth around Rs. 22,000 crore ($4 billion).

Russia will be procuring 42 new Su-30 MKI combat aircraft and 71 Mi-17V5 medium-lift helicopters.

The deals were signed during the 13th India-Russia Annual Summit in Delhi after Prime Minister Manmohan Singh and visiting Russian President Vladimir Putin reaffirmed their commitment to strategic and military partnerships.

India, traditionally one of Moscow's top arms clients, said the two sides would also set up a joint venture to make Russian-model helicopters.

"Russia is a key partner in our efforts to modernise our armed forces," Prime Minister Manmohan Singh said in a statement, welcoming Mr Putin as "a valued friend and the original architect of the India-Russia strategic partnership".

Putin's one-day trip, his first to India since he started a new Kremlin six-year term in May, underlines Russia's interest in India, long a regional ally and now a partner in the BRICS group of emerging-market nations.

Writing in a leading Indian daily earlier, Mr Putin stressed that "deepening friendship and cooperation with India is among the top priorities of our foreign policy".

"India and Russia show an example of responsible leadership and collective actions in the international arena," he wrote, a veiled swipe at the West and in particular the United States, which Putin accuses of seeking to impose its will on the world.

Russian defence industry sources had said the visit could produce deals on the sale of fighter jets and aircraft engines worth more than $7.5 billion. However, the main agreements appeared to fall short of that figure.

Under one contract worth around Rs. 13,000 crore ($2.2 billion) for licence production of 42 Su-30MKIs, Russia will deliver technical kits to the Hindustan Aeronautics Limited (HAL) to assemble them here.

With this contract, the number of Su-30MKIs in the IAF would go up to 272 in next four to five years with 170 of them already at present in the force.

These multi-role frontline aircraft could also be equipped with Indo-Russian joint venture BrahMos supersonic cruise missiles.

Under the contract for 71 Mi-17V5 choppers, 59 of these machines would be given to the IAF while the remaining 12 would be used by paramilitary forces in their anti-Naxal operations.

These helicopters would be used by the IAF to replace its existing fleet of older versions of Mi-17 and Mi-8 aircraft in its inventory.

This is a follow up order by the IAF for the new 'V5' version as it is in the process of inducting 80 such machines for which orders were placed around three years ago.

Already more than 40 of them have been inducted into the force at locations including Bathinda in Punjab, Srinagar and Bagdogra in West Bengal.

Separately, Russian Direct Investment Fund (RDIF) - a sovereign wealth fund - and Indian lender State Bank of India will jointly invest up to $2 billion to boost trade and economic cooperation projects.

RDIF said in a statement that the two firms will work together to facilitate access to long-term capital in Russia and India and promote mutual investments between the two countries.


Sistema's venture in India is 17 percent-owned by the Russian government, and the company says it invested $3.2 billion before India' Supreme Court in February ordered to cancel the licences in reaction to a corruption scandal.

"Failure to resolve this case could threaten India's broader diplomatic interests with Russia and standing in the global business community," the company had said in a letter.

Sistema, which has investments in companies ranging from telecoms to oil, challenged the court order and wants the government to find an alternative solution to avoid international arbitration.

"We understand this is a major issue for them," an Indian government official had told Reuters. The official confirmed the government received the letter, dated December 6.

Sistema declined to comment on the letter.

Earlier in February, Sistema had sent a notice to the Indian government citing a bilateral treaty between India and Russia and asked India to "amicably settle" the dispute in six months.

Sistema had said it had the right to approach an international tribunal and seek damages if the dispute was not resolved.

"The right of arbitration, nobody can take away from them," said the Indian official, who accepted the dispute could feature in Putin's visit on December 24.

Mr Putin postponed a visit to India that was widely expected in early November, shortly after Rogozin's trip. The cancellation was blamed on scheduling issues and not the Sistema row.