INS Vikramaditya (Adm Gorshkov) aircraft carrier

[I-G]

Glaring lapses in Gorshkov, Scorpene, Hawk defence deals: CAG
Rajat Pandit , TNN 25 July 2009, 01:17am IST


NEW DELHI: Sleazy wheeling and dealing, huge delays and financial irregularities continue to pervade all defence deals. The Comptroller and Auditor General has now hammered the defence establishment for glaring lapses in the two biggest naval projects — acquisition of Russian aircraft carrier Admiral Gorshkov and indigenous construction of six French Scorpene submarines.

This comes even as India under Russian pressure is getting ready to shell out almost $2 billion (Rs 9,680 crore) over and above what was initially a `fixed price contract' of $974 million for Gorshkov's refit, while the Rs 18,798-crore project to construct six Scorpenes at Mazagon Docks has slipped two years behind schedule, as first reported by TOI.

A senior CAG official, in fact, dubbed the Gorshkov deal as the "biggest defence mess-up" ever, stopping just short of calling it a "scam". ``The defence ministry did not provide us with full cooperation and access to documents for Gorshkov. As for the Scorpene project, undue favour and financial advantage was shown to the French vendor,'' he said.

In its latest report tabled in Parliament on Friday, the nation's auditing watchdog also punched holes in several other major defence projects, including the Rs 8,120-crore project for 66 British Hawk AJTs (advanced jet trainers). Interestingly, this also comes at a time when India is negotiating a follow-on order for 57 more Hawks.

While the desperate need for an aircraft carrier, a modern submarine fleet and AJTs to train rookie pilots cannot be overstated, what the CAG report underlines is a sordid saga of squandering away of public money, without even a hint of long-term strategic planning, whichever be the political dispensation in charge.

If the earlier NDA regime inked the initial $1.5-billion package deal for Gorshkov and the Hawk AJT contract in the run-up to the 2004 general elections, the UPA government in its first avtaar finalised the Scorpene project in October 2005, amid swirling allegations of kickbacks.

Coming down particularly heavily on the Gorshkov affair, the CAG report said, ``Indian Navy is acquiring a second-hand refitted carrier that has half the life span and is 60% more expensive than a new one.''

Originally meant to plug the `five-year carrier gap' in the Navy's capabilities from 2007 to 2012, Gorshkov is still a `high-risk' proposition since its delivery acceptance trials may not be completed even by 2012, it added.

Russia, as reported earlier, is demanding a whopping $2 billion more over and above the initial $1.5 billion contract of January 2004, under which the carrier refit was pegged at $974 million and the rest earmarked for 16 MiG-29K fighters to operate from its deck.

The CAG report pointed to a 2004 naval assessment that a new aircraft carrier, with a life of 40 years, would cost $1,145 million and take 10 years to build.

Gorshkov, in turn, would run for only 20 years. ``The acquisition cost has more than doubled to $1.82 billion in four years,'' said CAG, taking the $1.2-billion figure demanded by Russia in 2007 into account.

Listing out Gorshkov's `limited operational capabilities', CAG in particular expressed worry that a close-in weapon system — to detect and destroy incoming hostile missiles and aircraft — would be fitted on it only during its first refit in India around 2017.

As for the Rs 18,798 crore Scorpene project, under which the six submarines were to be delivered between 2012 and 2017, CAG blasted the government for taking nine years to finalize it despite Navy's depleting underwater combat force-levels.

Navy's projections show it will be left with only nine out of its present fleet of 16 diesel-electric submarines — 10 Russian Kilo-class, four German HDW and two virtually obsolete Foxtrot — by 2012. ``This would lead to serious operational ramifications,'' said CAG.

The government's delay in finalising the Scorpene project led to increase in its costs by Rs 2,838 crore. ``The submarine design selected has also not proven its efficacy in any other navy,'' it said.

``Moreover, the contractual provisions resulted in undue financial advantage to the vendor of a minimum of Rs 349 crore, besides other unquantifiable benefits,'' it added.

As reported earlier, the project has been dogged by some controversy, with allegations of kickbacks made in the October 2005 contracts signed with two French companies — Rs 6,135-crore with M/s Armaris (a DCN-Thales joint venture) for transfer of technology and construction design, and Rs 1,062-crore with M/s MBDA for sea-skimming Exocet missiles.

"Large concessions in respect of warranty, performance bank guarantee, escalation, arbitration, liquidated damages, agency commission were bestowed on the vendor," said CAG.

Similarly, CAG rapped the government for taking 22 years for finalising the Rs 8,120 crore project to acquire 66 Hawk AJTs, which were sorely needed to help train IAF rookie pilots on the intricacies of combat fighter jet flying and reduce crashes.

It also pointed out that the contract was concluded with BAE Systems in a single-vendor situation, without reviewing the `air staff requirements' laid down in 1987, as also slippages in delivery schedules, pricing anomalies in supply of spares and the like.

Glaring lapses in Gorshkov, Scorpene, Hawk defence deals: CAG - India - NEWS - The Times of India

 

[Terminator]

Only russian and french are black marked here what about israel systems?

Aircraft carrier is the biggest issue followed by submarines

then comes aircraft trainers and missiles which will explode at launch.

Seriously we are just moving ahead without a proper stratergy

 

[bhramos]

Even german HDW Submarines & Isreali SAM's were also blacklisted.

 

[duhastmish]

But guys did it came as a shock to you ?????
i mean - we always knew this - it just coming to surface now. there is fishy going in with our defence deals - we are lagging behind in - deals which should be over about 2-3 years ago - like mrca awacs. but we are ready to pay way too much money for a junk -aircraft carrier. which was suppose to be a gift to indian navy - as friend.
this much money if involved in our our carrier we would have been way forward.

 

[MitMeister]

seriously, I have a question. Is Government's Under-Table policy causing all these delays.. Is our Government taken for granted... Come on when Army and Navy are so desperate for hardwares, Politicians are not so serious.. Gorshkov is now worth more than new carrier with half the life span... Government got to learn from Chinese and American's while implementing defence projects.. Let there be Peace.

 

[RPK]

CAG picks holes in Gorshkov acquisition

K.V. Prasad



“Objective of inducting second-hand ship at high cost has been defeated”





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A second-hand ship is costing the Navy more than the price of a new ship

The cost of acquisition has more than doubled to $1.82 billion in four years


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NEW DELHI: With cost overruns and delay affecting the acquisition of aircraft carrier INS Vikramaditya (Admiral Gorshkov), the Comptroller and Auditor General of India on Friday said the Navy’s decision to go in for a second-hand ship has become questionable, and that the objective of its induction has been defeated.

High risk


“The objective of inducting an aircraft carrier in time to fill the gap in the Indian Navy has not been achieved. The cost of acquisition has more than doubled to $1.82 billion (Rs. 7,207 crore) in four years. At best, the Indian Navy would be acquiring, belatedly, a second-hand ship with a limited life span, by paying significantly more than what it would have paid for a new ship,” the CAG said in its latest report to Parliament.

The report said that although the CAG was not provided with full cooperation and access, it noticed after audit that the delivery of the ship — originally acquired to fill the five-year carrier gap during 2007-2012 — still involves high risk, as the delivery acceptance trials of the Gorshkov would only be completed by 2012 at the earliest.

The contract with Russia for the carrier was signed in October 2000, with India paying $875 for Repair and Re-equipping (R&R) the ship that was a ‘gift.’

It was to be delivered in August 2008, and was expected to fill the gap left by INS Viraat, the only aircraft carrier in service, which was originally to be decommissioned by 2007. INS Viraat is currently undergoing repair and refitting at Kochi.

Sea trials add to costs


The most substantial increase of $522.57 million, the report said, is on account of sea trials, originally contracted for $27 million.

“This has increased by almost 20 times to $550 million, creating doubts about the diligence exercised while estimating and negotiating costs,” it said.

In addition, the carrier will not have a Close-In Weapon System — a vital ship-board point weapon for detecting and destroying incoming anti-ship missiles and enemy aircraft at short range — under its first refit in 2017 in India.

The report also noted that monitoring and supervision was surprisingly lax, with no committee adhering to the frequency prescribed. “As a result, the enormity of the situation could not be foreseen till the vendor presented revised costs.”

Financial control diluted


It also said that financial control by the Indian side was diluted, as payment terms were not linked to physical outputs. While 66 per cent of the contracted cost of R&R has been paid, only 35 per cent of the work was completed.

The CAG surmised that given the expected force level of the Navy by the time the aircraft carrier was inducted, it was not clear how the Navy would provide an adequate complement battle group — large frigates, missile boats, and an air complement — for the carrier, as it would form the centre of a full-fledged group.

 

[RPK]

Acquisition of Admiral Gorshkov: CPI(M), SP express concern in LS

New Delhi (PTI): The CPI(M) and Samajwadi Party on Monday raised concerns over the acquisition of "second hand" aircraft carrier Admiral Gorshkov for the Indian Navy after a "20 time" cost escalation and a major delay in its delivery and demanded a clarification from the government on the issue.

"The Comptroller and Auditor General (CAG) has seriously questioned the government's decision to purchase the second hand aircraft carrier. The Defence Minister should make a statement and clarify what is the reason and why it is being purchased after its price has been escalated 20 times," CPI(M) leader Basudeb Acharia said in Lok Sabha.

He was promptly supported by former Defence Minister and SP chief Mulayam Singh Yadav who said the government should also clarify why Gorshkov was being acquired when its remaining life span was only 20 years instead of a new one which would have run for 40-50 years.

Mr. Acharia said the deal was signed in 2004 and the original price was $875 million.

After "protracted negotiations" of over two years, "you will be surprised to know that the price was escalated by 20 times ... to $1.2 billion and that too for a second hand aircraft carrier which has completed half of its life," the CPI(M) leader said during Zero Hour.

The issue was raised in the backdrop of a CAG report which pointed out that the refitted Russian aircraft carrier was coming after spending half its life span and was "60 per cent more expensive than a new one".

"The acquisition cost has more than doubled to $1.82 billion in four years", taking into account the $1.2 billion figure demanded by Russia in 2007, the CAG had said.

India and Russia are in the last leg of negotiations on the cost of repair and refit of Admiral Gorshkov and the final price was likely to be between $2.2 billion and $2.9 billion.

India had signed the agreement in 2004 for the aircraft carrier and sent it for refit to the Sevmash Shipyard in Russia. That apart, India also bought 16 MiG-29Ks to operate on the warship at a cost of $650 million.

 

[RPK]

Cost escalation for Gorshkov's refit transparent: Russia


As the Indian audit watchdog CAG questioned the prudence of buying a second-hand aircraft carrier from Russia at an exorbitant cost of USD 1.82 billion, Moscow has said the cost escalation for refit of the warship 'Admiral Gorshkov' was transparent and being monitored by the Indian navy.

"At several occasions our leadership has given public statements on the issue. Each and every step in the process of the refit of the aircraft carrier is monitored by Indian navy's technical team and they have never raised objections," said Vyacheslav Davidenko, the official spokesman for the Rosoboronexport (ROE) state corporation.

The ROE is the Russian government's nodal agency for executing foreign defence contracts.

Davidenko refused to comment on the CAG report for 2008, released on July 24, which wondered why the Defence Ministry was buying the warship second-hand which now comes at "half its life-span" and about "60 per cent more expensive" than a new aircraft carrier.

He, however, said that "this is India's internal matter."

Anastasia Nikitinskaya, official spokesperson of the Severodvinsk-based Sevmash shipyard, has claimed the cost went up as Indian Navy had been constantly changing specifications, which were not included in the initial estimate for upgrading the 44.5-thousand-tonne Kiev class carrier commissioned in 1987 by the Soviet Navy and decommissioned after the collapse of the USSR.

 

[venom]

The amount is big but we don't have any other option left.....

 

[RPK]

New contract for Admiral Gorshkov not finalised: Antony

NEW DELHI: India and Russia are yet to conclude negotiations on the "substantial increase" in price that Moscow has demanded for the aircraft
carrier Admiral Gorshkov, and the criticism expressed over the ship's viability will be kept in mind before signing the final contract, parliament was informed Wednesday.

"Russia has demanded a substantial increase. The negotiations on this so far have been inconclusive. Before we take a final decision, we will verify everything (said against the deal), including the report of the CAG (Comptroller and Auditor General)," Defence Minister A.K. Antony said during question hour in the Rajya Sabha.

He was responding to a supplementary on audit watchdog CAG's observation that the "second-hand" carrier will be 60 percent costlier than a new one and there is the risk of further delay in its delivery.

The original deal, signed in 2004, was for India to pay $1.5 billion for the vessel, mothballed since a devastating fire in 1995. Of this, $948 million was to be spent on refitting the 45,000 tonne vessel and the balance on the MiG-29 combat jets and Kamov anti-submarine warfare helicopters that would be deployed on the ship.

Since 2007, however, Russia has steadily been asking for more money, saying the extent of repairs to the vessel had been grossly underestimated. Various reports say Russia is now asking for between $2.2 million and $2.9 million.

Protracted negotiations, even at the level of Antony and his Russian counterpart, have so far failed to resolve the impasse.

Detailing the events in the run up to the signing of the 2004 contract, Antony said the Indian Navy had since 1994 been searching for an aircraft carrier from all available sources.

"After an elaborate search, it was realised that no country was in a position to sell us an aircraft carrier. Russia then offered us the ship as a gift (after paying for its retrofit and the aircraft it will carry).

"The government of the day took a decision and the contract was signed in 2004," Antony explained.

The CAG thinks differently.

"The cost of acquisition has more than doubled to USD 1.82 billion (for the refit) in four years. At best, Indian Navy would be acquiring, belatedly, a second-hand ship with a limited life span by paying significantly more than what it would have paid for a new ship," it said in its report released July 24.

"It can be seen that Indian Navy was acquiring a second-hand refitted aircraft carrier that had half the life span left and was 60 percent more expensive that a new one," the report maintained.

The report also pointed out the carrier would have limited operational capabilities and certain key capabilities which would enable it "to meet potential threats or challenges" had either not been provided for or been postponed to a later date.

"The anti-aircraft missile complex selected to be fitted in the ship failed during the trials and the refurbishment contract was concluded without the missile system...This implies that the ship would not have a CIWS (Close-In Weapon System) till her first refit in India in 2017," the report pointed out.

The CIWS is a vital shipboard weapon for detecting and destroying incoming anti-ship missiles and enemy aircraft at short range.

The carrier was scheduled to have been delivered in 2008. This has now been pushed back to 2012, with the vessel becoming due for its first refit in India in 2017.

 

[youngindian]

India still negotiating price on aircraft carrier Admiral Gorkshov: Antony

July 29th, 2009



New Delhi, July 29 (ANI): Defence Minister A.K. Antony on Wednesday informed Parliament that India and Russia are yet to conclude negotiations on the price that Moscow has demanded for the aircraft carrier Admiral Gorshkov, and the criticism expressed over the ship’s viability will be kept in mind before signing the final contract.

Replying to a question in the Rajya Sabha, Antony said Russia has demanded a substantial increase in the price, but the negotiations so far have been inconclusive, and assured the house that before taking a final decision, the ministry will verify everything, including the report of the Comptroller and Auditor General (CAG).

The CAG’s recent report observed that the second-hand carrier would be 60 percent more costly than a new one and that there is a risk of further delay in its delivery. The original deal signed in 2004, was for India to pay 1.5 billion dollars for the vessel, of this, 948 million dollars was to be spent on refitting the 45,000 tonne vessel and the balance on the MiG-29 combat jets and Kamov anti-submarine warfare helicopters that would be deployed on the ship. Even protracted negotiations, between the Defence Ministers of both countries have failed to resolve the impasse.

Antony explained to members that as the Indian Navy has been on the look out for an aircraft carrier since 1994 from all available sources, it was realized that no country is in a position to sell an aircraft carrier.

Russia then offered the ship as a gift, after paying for its retrofit and the aircraft it will carry, the then government took a decision and the contract was signed in 2004, he added The CAG report also pointed out that the carrier would have limited operational capabilities and certain key capabilities which would enable it to meet potential threats or challenges had either not been provided for or have been postponed to a later date. The report said that the anti-aircraft missile complex selected to be fitted in the ship failed during the trials and the refurbishment contract was concluded without the missile system.
The CAG also expressed its concern over the ship not having a Close-In Weapon System (CIWS) which is a vital shipboard weapon for detecting and destroying incoming anti-ship missiles and enemy aircraft at short range until her first refit in India in 2017.The carrier was scheduled to have been delivered in 2008. This has now been pushed to 2012. (ANI

India still negotiating price on aircraft carrier Admiral Gorkshov: Antony

 

[natarajan]

Initially india bought aircraft carriers from uk so i think we must get ac from uk,france with more than 60000tonnes driven by nuclear reactor:2guns: it will make chinese to wet their pants

 

[prabhatmthr]

Dear Natrajan- for one ,the Chinks don't wet their pants easily. Since basically we are always in the defensive mode vis-a-vis China, only SLBM's,IRBM's, long range nuke tipped/conventional cruise missiles will make them rethink before any misadventure.
A network of all weather roads on the northern border with close support basis will deter a fiasco like 1962.
With the Chinese always carry an olive branch on your left hand, while hiding the big stick behind your back-Just in case ! And then they'll respect you .

 

[SATISH]

Initially india bought aircraft carriers from uk so i think we must get ac from uk,france with more than 60000tonnes driven by nuclear reactor:2guns: it will make chinese to wet their pants

Wow I never knew anyone whop is offering a nuclear powered carrier. Wait...no one other than the Russkies even offer a carrier to us way back in 2004.

 

[natarajan]

Wow I never knew anyone whop is offering a nuclear powered carrier. Wait...no one other than the Russkies even offer a carrier to us way back in 2004.

i said abt viraat and vikranth wich was bought frm uk and we may get super carriers frm uk as we have already bought viraat and vikranth

 

[venom]

Russia may not return money

Having already paid up $602 million (Rs 3,010 crore) for a second-hand, 22-year-old Russian aircraft carrier, the government is now saying the deal is yet to be sealed with Russia, which is unlikely to return any money.

“No final decision has been taken (on Admiral Gorshkov),” Defence Minister A K Antony told the Rajya Sabha on Wednesday. The Comptroller and Auditor General (CAG), country’s top auditor, has criticised the government for buying a used carrier which costs 60 per cent more than a new one and will have a 20-year shorter life span.

When the NDA government was in power, India had contracted to buy the 45,000-tonne Gorshkov in January 2004 for $1.5 billion (Rs 7,500 crore, at current exchange rate), including $974 million (Rs 4,870 crore) for refurbishing the carrier.
The navy was at that time looking for a carrier as its only aircraft carrier, INS Viraat, was due to retire in 2007 and the Indigenous Aircraft Carrier was unlikely to be inducted before 2012.

The contours of the deal, however, have changed drastically over the last five years. The Russians now want $2.9 billion (Rs 14,500 crore) for the warship, while the defence ministry is bargaining for $2.2 billion (Rs 11,000 crore).

The government admitted that the Russians were demanding an obscene sum, but said no other country was willing to sell an aircraft carrier to India five years ago.

Seeking to allay fears that the navy would end up buying a lemon from Russia, Antony said the government would keep in mind the auditor’s criticism before endorsing renegotiated terms.

“The Russians have demanded a substantially huge amount. We are still negotiating the deal. No final decision has been taken.”

A re-negotiated contract will have to be approved by the Cabinet Committee on Security. As most components of the warship were Ukraine-made, Russia said it was unable to assess refurbishing cost, hence, the price revision, Antony said.

The CAG found that the cost of sea trials had spiralled many times over. Pegged at $27 million (Rs 135 crore), India will now have to shell out a huge $550 million (Rs 2,750 crore) for the trials.

The auditor said the 20-fold jump in price had created doubts about “the diligence exercised while estimating and negotiating costs”.

Russia may not return money

 

[SATISH]

i said abt viraat and vikranth wich was bought frm uk and we may get super carriers frm uk as we have already bought viraat and vikranth

Sorry to break the news but no one is offering us any. The UK and French are replacing their carriers with conventionally powered carriers. And the NPT forbids the signatory countries to sell nuclear technologies to other countries. The French are already having trouble with their Charles De Gaulle. The Steam catapult seems to be harder to maintain. 60k tonne of Aircraft carriers falls in Mid size carrier range not a full sized super carrier. FYI only the US operates Super Carriers.

 

[RPK]

Navy chief defends price paid for Admiral Gorshkov


New Delhi, Jul 30 (PTI) Under attack from Comptroller and Auditor General of India (CAG) for the escalating cost of second-hand aircraft carrier Admiral Gorshkov bought from Russia, Indian Navy Chief Admiral Sureesh Mehta Thursday defended the price being paid by New Delhi for the warship.

"I can't comment on the CAG. But you all are defence analysts, can you get me an aircraft carrier for less than USD two billion? If you can, I am going to sign a cheque right now," Mehta told reporters on the sidelines of the 'Naval Self Reliance Seminar' organised by CII.

When asked about CAG's finding that the Navy had not done its risk analysis before going in for the ship, he said, " I can ensure you that there is no such thing. There is no question, we have been looking at the ship since late 90's.

 

[I-G]

Navy chief defends Gorshkov deal after CAG raps govt
PTI 30 July 2009, 03:53pm IST


NEW DELHI: With the CAG slamming the government for buying the second-hand Admiral Gorshkov at the price of a new aircraft carrier, Navy Chief Admiral Sureesh Mehta on Thursday defended the price being paid by India for the warship. ( Watch )

"I can't comment on the CAG. But you all are defence analysts, can you get me an aircraft carrier for less than two billion dollars? If you can, I am going to sign a cheque right now," Mehta told reporters on the sidelines of the 'Naval Self Reliance Seminar' organised by CII.

In its report, the CAG had noted that till 2008 the escalated cost of the aircraft carrier was about $1.82 billion and another $522 million for the sea trials, which was originally pegged at $27 million in the 2004 contract.

India had bought the 45,000-tonne Gorshkov from Russia in January 2004 at a total cost of $974 million, which included its refit and repair.

The Russians have thrice revised the price of the Admiral Gorshkov since 2007 and have made a final demand of additional $2.9 billion this February. India is carrying out final price negotiations with Moscow and is willing to pay around $2.2 billion for the ship.

During the Question Hour in Rajya Sabha on Wednesday, defence minister A K Antony had said that the government would agree to a fresh price for the warship only after going through the audit report.

Navy chief defends Gorshkov deal after CAG raps govt - India - NEWS - The Times of India

 

[venom]

'More upgrades will hike the Gorshkov's price'

A consummate Russian diplomat, Vyacheslav Trubnikov is returning home this week after having served as serving as Russia’s ambassador to India for nearly five years. The period has seen several highs and lows in the bilateral relationship, including the building of the first civil nuclear power plants by Russia and nagging problems over defence spares and equipment. Edited excerpts from an interview with Jyoti Malhotra

In your last incarnation as ambassador of Russia to India you spent about four years, but 17 years altogether in India.
I first came here in 1966 as a graduate student writing a thesis on the Tashkent Declaration. I spent six months here and was amazed by the country —it was my first trip abroad. I came back as a journalist in March 1971, working for Novosti press agency, and stayed for seven years. I witnessed many milestones in our history: The Indo-Soviet treaty of friendship, the disappearance of East Pakistan from the map of the world and the birth of Bangladesh. In December 1971, along with some other foreign journalists, I crossed the border with Indian troops. I was fortunate to also serve in Bangladesh as ambassador. Yes, I am chained to the sub-continent !

Many Indians remember the time when the American aircraft-carrier USS Enterprise entered the Bay of Bengal when India and Pakistan were at war in 1971 and the Soviets sent a warning..
Yes, and many in the international community also remembers our veto in the UN Security Council. India was assured, as an outcome of the Treaty of Friendship with the Soviet Union, that it will not be a subject to military pressure from a third country.

So much has changed since then, especially in the Indo-Russian relationship…
Yes, the Soviet Union no longer exists, Russia is a new country. India has changed tremendously too, today’s India is a country which claims for itself a proper place in the international community. In fact, the relationship has now become more balanced, more pragmatic and our dependence on each other has grown.

What does that mean?
In the 1960s, India still needed external support, especially in building its industrial foundation. Today’s progress, for example in software, wouldn’t be possible without the creation of an industrial basis, in metallurgy, machine-building, etc, where Soviet assistance was a major factor. Independent India did not have enough hard currency to pay for building its economic foundation, and you know the private sector abroad is usually never generous about giving credits. But the Soviet Union gave state credits. Today, the relationship is much more equal. For example, in the military-technical relationship, we are now in the very serious process of changing it from a seller-buyer one to one where there is joint design, joint production and even joint marketing.

And an example of this would be?
The Brahmos missile. Discussions to sell it are on with several countries which have long seashores in South America. In India too, the missile is being integrated into Indian ships as well as on land. Indian submarines are going to be equipped with it as well.

But India is buying defence equipment from other countries, which means Russia’s share comes down. Does this worry you?
Yes, the market is becoming more and more competitive as India diversifies its sources of arms and ammunition. This is normal as India cannot be dependent on one source. Even earlier, Russian MIGs flew side by side with British Jaguars and French Mirages. But what is new is that along with the licence to produce the equipment, India wants technology to be transferred as well. For example, in the deal to buy 126 fighter jets that is now on the table, Russia’s Mig 35 aircraft is competing. But alongside the licence to produce a certain number of Mig-35s in India, we have also offered to transfer technology. By and large, other countries don’t transfer technology, but as a result of our offer other countries who now want to be competitive will have to follow suit. Moreover, offsets are a very significant part of this deal, about 50 per cent (although for deals above $600 million, it is usually 30 per cent). This is not a very easy thing to do, but if India wants, the offsets could also be in the transfer of dual-use technology

Do you think this 126 fighter jet deal, worth abut $12 billion, is also a political deal?
Every military-technical deal has undercurrents painted in political shades. The most important point is, however, that the supplier should be 100 per cent reliable. India has had several opportunities to try the reliability of its partners. I believe Russia’s cooperation has been the most reliable.

Then why is there so much bitterness, for example, in the purchase of the aircraft carrier, Admiral Gorshkov; even Russian president Dmitry Medvedev has admitted that…
Yes, I accept there has been some bitterness on both sides. But at the same time both sides want to come to consensus because we understand that the Gorshkov or INS Vikramaditya is absolutely essential for India. We could have taken it back to our own Navy and returned the money to India, but we did not do it. I am absolutely sure that some people in our Navy want it back, but we understand that this is the flagship of India’s eastern fleet. We are responsible enough to understand that India must get this aircraft carrier. India understands this too. The question is tha of price and timing of delivery.

So what happened over the years?
The discussions between the two sides started when ‘Gorshkov’ was only a boat, without any equipment. You have to realise that the final price (of the aircraft-carrier) and the time of its completion, ultimately depend on the character and quality of the order placed by the buyer, which includes the refit, the equipment on board and its necessary upgrades. And usually the appetite changes as you eat.

Are you saying the Indian side kept changing its order?
Not changing, but the Indian Navy was eager to get the best, the most modern equipment.

So the Navy’s appetite kept increasing, they wanted more and more..
Yes.

... But this constant back and forth, officials traveling up and down and the long delays?
The major reason is that the contract was signed when the Russian side, the plant Sevmash, badly needed money and wanted to sign the contract, while the Indian side wanted to buy an absolutely modern aircraft carrier at lower than the cheapest price. After the contract was signed (in 2004), both sides began to understand exactly the enormity of the task they had undertaken to do. But the realisation came a little late.

The Indians complain that the Russians are constantly changing the price.
Yes, we are changing the price, but if the value of the dollar changes, should we stick to the same figure? If the price is in our favour, do you think the Indian side would pay more? I don’t think so. It is a serious commercial discussion.

Reports are that it will cost around $2.2 billion?
It would be irresponsible of me to comment. Price negotiations are now entering the final stage. What is important for India is also the time of delivery. But the point is that if India wants additional equipment, the carrier will cost even more. So if both sides stop and decide, okay no request from India and no increase in price from our side, then we can finalise price and delivery.

What do you make of the US Navy which wants to work with the Indian Navy to keep the sea lanes open, from the Straits of Malacca to the Gulf of Hormuz? India’s Russian-built aircraft carrier will help in doing this?
We are not adverse to this, we are ourselves prepared to discuss with NATO joint patrolling of sea lanes to combat against piracy. In this globalised world there are so many challenges which cannot be dealt with individual states no matter how mighty wealthy or influential they are. Everybody has to work together.

What about the problem of defence spares? This has been going on for nearly two decades since the break-up of the Soviet Union in end-1991?
Now this problem has almost been solved, but you have to understand why it happened in the first place. You see, when it was the Soviet Union, and India placed an order, the plant in question got an order from above and they produced whatever was ordered. The plant got everything it wanted from the Centre — money, etc. It was not their business to think about who the buyer was, what was the price, etc. But in the new market economy, things have changed totally. Now the question is, why should a plant that was producing a certain model of aircraft keep producing the spares of this aircraft when that aircraft has become outdated? Now the plant has begun producing something else and suddenly, the Indian side decides, oh we need so-and-so spares! So the Indian side writes to Rosoberonexport (Russia’s arms export agency), which writes to the plant in question, which writes back asking for guarantees that a certain number of spares will be bought. This was the major difficulty that accompanied our switching from a centralised economy after the break-up of the Soviet Union, to a market economy. In the new economy, if there is no demand, there is no supply. And when the plant doesn’t have enough money to produce the (defence) spares, they stop production.

It took nearly 20 years to understand?
Well, there’s something else too. You see, India is a very different country. Most countries in the world, when something gets outdated, they throw it away and order new equipment. But in India, the defence policy-makers prefer to upgrade and modernize what is still possible to use. For example, you could change the engine of an aircraft, but keep its body, which is still good. But the point is, as things changed in Russia, we stopped producing both the engine and the body of the aircraft altogether. So now what to do? We are not going to produce a handful of engines only for India, so as to satisfy an Indian demand for the next three months only? For example, the IAF is still flying the Mig-23 Bis aircraft, but we forgot about this model a long time ago ! We don’t even remember whether it exists or not ! But the Indians are still thinking in terms of flying this plane !

Having said that, in the last few years, India’s relationship with the US has become much stronger, possibly at the expense of Russia?
I don’t think so. Not only have relations changed between India and Russia, but India’s relations with many other countries have changed in many ways. For eg, I believe it is the US which has changed its direction of cooperation with countries in Asia. I think it is the US which is tilting towards India, not the other way round ! But it is true that the Americans had a comfortable period of ten or more years to improve relations with India, (after the break-up of the Soviet Union) when Russia was busy in its internal transformation, and the US worked much harder (than us) in improving relations.

So Russia lost out, in a sense?
In the course of our internal transformation, it is true India did not play as big a role for Russia as it did for the Soviet Union. We had to change a lot of our priorities. We changed our ideology, we changed our economic patterns — from a centralised economy to market economy — we changed our psychology which is a very painful process. We were very busy with this for several years, as we were busy with mending fences with the West, as we wanted to prove that we were not a threat to the West. So the bulk of our attention and efforts was directed towards the West, I don’t think India should be jealous about this ! Now that relations between India and the West are much better, we are prepared to participate in honest competition. India is winning new friends, but I don’t think it is at the expense of old and tested friends. I think the Indian leadership is very aware of its national interest.

Do you think the competition may not be honest?
Yes, it may not be honest. Perhaps in a market economy it is the rule to paint your opponents black, to engage in character assassination, but we don’t want to participate in this kind of competition.

So you agree the priorities of both countries have been different in recent years?
I would say, independent of the way Russia was changing internally, it was only Russia which began to construct nuclear power plants in India, when India was under sanctions from all over the world, at the initiative of the US. I think the Indian side appreciates what Russia did, rather highly. Not only this, we supplied fuel for Tarapur (nuclear power plant) for which we don’t have any connection. But we did it for the safety of the power plant and because India needed it.

So India need not fear from the G-8?
Of course not.

But you heard what the Americans have said…
With the Americans it is far more complicated. Unlike the French and Russians, the US administration can say one thing, and the US Congress can say another. Independent of what Madame Hillary Clinton said in India (that full nuclear cooperation would take place), a lot of things will depend on what the US Congress decides.

... irrespective of what the Americans decide?
We have our own approach to this matter…

And you will go ahead with full cooperation in nuclear issues?
We will definitely go ahead.

So Russia is building two reactors in Kudankulam at the moment and how many more?
Two right now, another four will be built here, and another couple of sites are likely to be offered by India. You know the local population at Kudankulam did not at first want the nuclear plant, there were several demonstrations by the fishermen, but now they are persuaded. They have jobs, they know the reactors are totally safe. The new reactors also will be likely near the sea-shore, because you need a lot of water.

India is committing to buy 10,000 MW from the French, the Americans and the Russians…does this sound like a ‘khichri’?
Not at all, I feel diversification is in India’s interest. But India should be cautious choosing its partners and take into consideration, reliability. If something happens suddenly and this particular partner stops its work and freezes construction, then other problems will follow. There are so many examples (of this occurring), in Iran for example, we are assisting with the Bushehr reactor, but it was not the Soviet Union began to build the reactor…but we decided to take over the contract.

Why is the relationship so bad?
Because the businessmen on both sides don’t know each other. In both countries there are very serious impediments, red tape and the bureaucracy. The process to get a licence in India is awful…you see, business like electricity, will go where it is easier to go, and will not wait for a visa. Mr Mordashov, the owner of Severstal, one of our biggest figures in the steel industry, he fought Mr Lakshmi Mittal for Arcelor, came to India a couple of years back to participate in the metallurgical congress. I told him, why don’t you invest in India, there is such good iron ore and you can get a stake in a special economic zone…He told me that he had heard that it would take two years to get a licence and that he cannot afford to wait for so long.

This is true for Russia as well?
Yes this is true for Russia too.

They have met only once.
Yes, but they are expected to meet again this year. But the business relationship is not only about two men… When I came to India five years ago, trade was only $1.7 billion, but last year it grew to nearly $7 billion. The upswing is there. Of course, the global financial meltdown has affected the relationship. We have now decided to consolidate the rupee debt and invest it in India or third countries. But a lot of apprehensions remain on the Indian side. You still talk about the influence of the Russian mafia, but you know that other countries are not afraid. German companies, for example, they are doing so well in Russia. But some people here in India are so attentive to what the newspapers say that they prefer not to look at the reality on the ground.

You think not enough Indians know Russia?
Of course! And not enough Russians know today’s India. We are both developing so rapidly that we cannot imagine even the extent of this change.

So we take each other for granted?
Yes! And this is very bad. We must take each other as strategic partners and try and find out what is important to each of us in the coming years. Our strategic partnership is based on very serious parameters, such as energy. India is a huge consumer of energy, Russia is a supplier. We are natural allies in this. Then, in our military-technical relationship, a high percentage of Indian arms equipment still has a high Russian content. I watched the launch of India’s first nuclear submarine at Vishakapatnam on July 26, and do you know about the design of this submarine? It is the Akula (the Russian submarine).

So where was the Indian submarine designed and built?
Here in India !

Ambassador, you spoke of the changing relationship with India, but it also seems that Russia’s relationship with Pakistan is also changing rapidly. The Pakistan army chief, Gen. Ashfaq Kayani was in Moscow recently…
Just because someone, even if he has a high stature, visits another country, doesn’t make the visit substantial. The most important factor in the improvement of Russia’s relations with Pakistan is internal stability, which is not there. That’s why I cannot say we are developing active relations with Pakistan. Of course we don’t want Pakistan to be excluded from the international community, we want it to participate in globalisation and other processes, but I cannot say that there is something remarkable about our relationship with Pakistan.

Your country knows Afghanistan well. Do you feel that Pakistan is still involved with the Afghan Taliban?
Under military rule (in Pakistan), we knew that the ISI was a state within a state. But even today, it seems to me, that the ISI is playing its own game, because it continues to keep very close ties with the Taliban.

So Russia’s decision to allow American planes carrying lethal arms to overfly Russian territory, to Afghanistan for the first time since 9/11, is significant?
NATO countries have been doing this for some time. Yes, this is the first time that the Americans have been allowed. But I cannot say that the Russian-US joint cooperation in Afghanistan is a unique feature because Afghanistan is a problem that affects the whole world. In fact, the problem of drugs is much, much greater for us than it is for the US. The Americans, I believe, have a higher tolerance of the drug problem because it doesn’t affect them directly. But it affects Afghanistan’s neighbours, including Iran. The Iranians fight like hell with narco-couriers on the border. The same with Tajikistan and other Central Asian republics. And because Russia is their neighbour, we are affected enormously by this menace, by this evil of the 21st century. But I believe we can effectively deal with this menace only when the international community is united, because drug dealers are always a step ahead, they are very inventive with taking the drug to new places. And over the last decades we have seen in front of our eyes how a transit country, like Russia, has become a consumer nation.

'More upgrades will hike the Gorshkov's price'