Russia has demanded a substantial increase in price. 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), Antony said during question hour in the Rajya Sabha.
The defence minister was responding to a supplementary on CAGs observation that the second-hand carrier will be 60 % costlier than a new one and there is the risk of further delay in its delivery. According to the original deal, signed in 2004, India was to pay $1.5 billion for the carrier. Of this, $948 million was to be spent on refitting the 45,000 tonne vessel and the balance on the MiG-29
combat aircraft and Kamov anti-submarine warfare helicopters that would be deployed on the ship.
However, since 2007, Russia has been arm twisting India for more money on the ground that 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.
Sources, who are privy to the negotiations, told FE on conditions of anonymity that, Actually, the contract for the aircraft carrier was signed in a hurry. Moreover, in every big contract problems erupt over price and what goes on board.
Citing example of the INS Viraat where problems related over the pricing and delay had surfaced, sources pointed out that, The market prices have escalated, therefore, for the Russians to seek more from India should not been seen in a negative way.
Strategic and naval experts have observed that no modern aircraft carrier of the size of Admiral Gorshkov can cost less than $ 2.5 billion. Talking to FE, CMDE (retd) Ranjit B Rai said that, A brand new aircraft carrier as big as what we have been negotiating for is not going to cost anything less than $2.5 billion to 3 billion in the market. The kind of home work that has been done on the Admiral Gorshkov will provide India with the best and the latest technology and weaponary, he said.
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, the minister explained the House. The former Russian envoy to India had said that, both the countries were expected to reach a final agreement on the cost of overhauling the Admiral Gorshkov aircraft carrier by the end of this month.
Both sides are coming to terms on the price and the date for commissioning for the Indian Navy. It will be announced within a fortnight. I do not want to speculate on the costs... it could be more than $2 billion, said Russian Ambassador Vyacheslav Trubnikov after a five-year stint.
The current contract covers a complete overhaul of the ship and equipping it with modern weaponry, including MiG-29K Fulcrum aircraft and anti-submarine helicopters.
A joint Indian-Russian working group is negotiating and preparing a revised agreement on the Admiral Gorshkov (to be renamed INS Vikramaditya), which is to replace Indias ageing INS Viraat carrier. What is important here is that both sides have expressed goodwill. India needs this aircraft carrier, said Trubnikov.
However, according to CAG report, The cost of acquisition has more than doubled to $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. 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.