On the eve of Defence minister AK Antony’s visit to Moscow for the annual meeting with his Russian counterpart, the two sides seem to have managed a breakthrough.
NEW DELHI: On the eve of Defence minister AK Antony’s visit to Moscow for the annual meeting with his Russian counterpart, the two sides seem to have managed a breakthrough.
Moreover, the development has taken place in the most contentious area of their recent relations: fixing annual escalation in defence contracts in the light of the weakening dollar.
According to sources, India has agreed to give a 5% annual escalation for the bilateral defence contracts with Russia. For the past few months, India and Russia have been engaged in intense negotiations over the Russian demand that the present annual escalation rate of 2.80% be increased because of the weakening dollar.
The Russians have been demanding an annual escalation of 7%. During the negotiations, various suggestions had emerged including a proposal to convert all Indo-Russian defence contracts into Euro.
However, sources now indicate that last weekend the two sides agreed on a 5% escalation. The first contract to be signed with the new clause would be the purchase of 40 Sukhoi-30 fighters, at 1.6 billion dollars. With this purchase, the total number of Sukhois with IAF would go up to 230. The new fighters are expected to join service by 2010.
India and Russia have ongoing defence contracts worth almost $10.5 billion dollars. Many of these are facing delays, some of them being blamed on the dispute over the escalation clause. Now that there is a breakthrough in it, sources indicate that the bilateral defence cooperation could pick up pace.
The breakthrough comes a day ahead of Antony’s visit to Russia for the annual India-Russia Inter Governmental Commission on Military Technical Cooperation.
The Commission is co-chaired by the defence ministers of the two sides. A high-level delegation including defence secretary Vijay Singh, secretary (defence production) KP Singh, Hindustan Aeronautics chairman Ashok Baweja and others are also expected to attend the meetings.
The visit comes at a time when Indian defence market is being aggressively courted by the US and other developed nations. The Russians have been concerned over their losing market, but they are still aggressively pitching their tenders for various defence contracts.
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