Given that India buys 30% of all Russian defence exports, and that Russia actually leased India a nuclear attack submarine (INS Chakra) for a 10-year period, it’s not surprising the ties between the two countries remain deep. While India inked a $3 billion deal for 42 Sukhoi-30s to be put together by HAL from Russian kits and for 71 Mi-17V5 helicopters (in 2010, the original deal was for 59 such machines) when Russian President Vladimir Putin was in the capital on Monday, the ties extend to the $2.3 billion INS Vikramaditya, to cooperation in developing a nuclear ballistic missile submarine, cruise missiles, working on joint development of a fifth generation fighter aircraft and building more nuclear power plants. The ties may have come under some strain with India buying non-Russian weapons systems, but that seems to have been overcome since there is enough ordering being down.
Which is why it is unfortunate that the Sistema telecom licence cancellation has got entangled with ONGC Videsh Limited’s (OVL) request for tax concessions on its Russian investments. While OVL invested in Russia when there were no tax concessions for work in western Siberia, it found the much lower than anticipated recoveries meant it would make losses, especially given the high 35% mineral exploration tax and the 50% corporate tax—hence the request for a 10-year tax holiday along with a waiver of the mineral exploration taxes. Not surprisingly, the Russians have brought up the issue of the Supreme Court cancelling Sistema’s CDMA-mobile telecom licences. Sistema’s