By DN Verma

A directive from the office of Indian Prime Minister has settled the controversial issue of buying an old/refurbished and overpriced Russian aircraft carrier by India for a huge revised price. The new price is more than double the original price settled five years back but the Indian Prime Minister has ruled that traditional friendship should be the deciding factor and not commercial considerations or the original agreement.

Now the refurbished carrier, Admiral Gorshkov, would cost India a whopping amount - that too for a ship launched 27 years back and retired by the Russian Navy 13 years back. By the time the ship is received as INS Vikramaditya, commissioned in the Indian Navy, and active for a couple years, it would be fit to retire again.    

Gorshkov's price is now settled with Russia at $2.3 billion, instead of the originally settled $974 million out of which more than six hundred million dollars were already paid. In addition, the original deal for the delivery of the carrier by 2008 would be postponed to 2012 and this delay would not be penalized in any way.

And above all, mind you, the Russian aircraft carrier is not brand new, it's an old ship launched in 1982, commissioned in the Soviet Navy in 1987, retired in 1996 and was inactive for 8 years expecting a buyer. It was put up for sale and when no buyer came up, was offered to India for free.

The agreement with India in 2004 was for $974 million for fully  refurbished, re-equipped and repainted etc (repackaged if you may) to be delivered by 2008 strengthening the bonds of friendship with Russia once again. Now it means that the value of friendship is very much more than a confirmed commercial deal and agreement about the price and delivery date.

Earlier this year when the Russians asked more money- double the original - there was bitterness on both the sides. The Indian Navy took a strong stand and asked the Russians to stick to the original deal. Notwithstanding that, now the Indian government, with the pressure from the Prime Minister's Office (PMO) - means Prime Minister Manmohan Singh - has finally agreed to pay this inflated price and accept the new schedule of delivery.

The PMO was authorized to say earlier this month that the high level of friendship with Russia has to be maintained and an agreement had to be worked out, preferably before Manmohan Singh left for Moscow December 6. The formal okay was clinched, ironically, on Nay Day, December 4, with a visiting Russian delegation, according to the latest issue of India Strategic Defence magazine.

The Russians ‘graciously' agreed to add a few more gadgets on the ship as desired by the Indians and the new, more costly ship, would finally be re-built to be delivered some three years later.

A year before the original date of delivery, the Russian company,   Rosoboronexport, that was responsible for selling and exporting all the military weapon systems, indicated a rise in the cost and extension of the delivery schedule.

The year the ship was to be delivered, originally, the Russians raised the price an additional $1.2 billion. Their excuse was that the original deal had miscalculated the costs and more is needed to fully refurbish the ship and had been originally estimated.

Subsequently the total price went up to $2.9 billion and the delivery not before 2012. The said the factors for this new development included the higher price of oil. These things were never mentioned in the original deal.

Tough negotiations ensued but the Russians stuck to their demand, only coming down to $2.4 billion after India reacted strongly. The Indian Navy had agreed to consider an additional $1.2 billion and nothing more. But with the Prime Minister's intervention, finally, India agreed to pay a total of $2.3 billion - a hefty raise, but with some additional equipment, a face-saving device.

While on the Russian visit, a member of the Prime Minister's party confirmed that the deal over the price of the ship had been reached.
It was also said that there was considerable goodwill on both the sides following the final agreement over the price and delivery.

India also agreed for a delayed delivery by 2012 without any penalty, though the Navy needs an aircraft carrier, now. India had already paid the Russians $600 million when the agreement was finalized in 2004. This year India also paid another $122 million.

Meanwhile India is working on its own aircraft carrier at the Kochi  shipyard in Kerala, a southern Indian state.

The lesson about tough bargaining when you are in dire need should not be lost on the Indian government. Besides, friendship should be an enabling factor for you to clinch a satisfactory deal, and not otherwise. Friendship is a two-way street but somehow, Indian government has not been following the principle. In the name of friendship Indian taxpayer is fleeced. Who would accept a very old, refurbished ship at double the price and also delayed delivery, that too without any penalty clause? Only India!

So much for the one-way friendship!