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During the upcoming visit of the Indian Prime Minister Manmohan Singh to Russia, a couple of major defence–related deals are to be finalized with Russia including a 10-year deal on weapons, aircraft and maintenance contracts estimated at around $5 billion. The first agreement will be on extending the Military Technical Cooperation for ten years from 2011 to 2020 and the second relates to After- Sales Product Support for Defence Equipment of Russian origin.
Although these two major agreements are expected to be inked during the Indian Prime Minister’s visit to Russia, the crucial and highly anticipated deal for the aircraft carrier Admiral Gorshkov may not be finalized in this visit.
Defence Ministry sources indicated that despite positive developments in the negotiations, the deal for the refurbishment of the aircraft carrier has not been finalized. The price negotiations for Admiral Gorshkov aircraft carrier have gone on for along time and no outcome has been reached.The Russians have demanded $2.9 billion, instead of $974 million, which was originally contracted. As for India, it has asked Russia to bring down the price to $2.1 billion.
While the price negotiations are being finalized, Russia has assured that the refitting of the aircraft carrier will not be stalled as per the contract. However, Russia will only speed up the refurbishment of the vessel once the final price tag has been laid on it.
Under the original $1.5 billion 2004 contract between Russia’s state-run arms exporter Rosoboronexport and the Indian Navy, which included delivery of MiG-29K Fulcrum carrier-based fighters, the work on the aircraft carrier was to have been completed in 2008. However, Russia later claimed it had underestimated the scale and the cost of the modernization and asked for an additional $1.2 billion in 2007. After long-running delays and disputes, India offered to raise the refit costs for the aircraft carrier by up to $600 million in February 2008. Russia was not satisfied with the proposed amount and the issue of the additional funding remains unresolved. Talks on the additional funding agreement are currently underway and Russia has demanded a total of $2.9 billion.
Russia has pledged to finish the Admiral Gorshkov’s overhaul as soon as possible and deliver it to India in 2012 if the additional $1.2 billion funding is provided by India.
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