Defence deal, other key trade and investment pacts also likely
During a truncated India visit of Russian President Vladimir Putin, beginning tomorrow, some hectic behind-the-scene activity is likely to yield a partial resolution of Russian telco Sistema’s troubles, besides the inking of a defence deal and half a dozen other trade and investment pacts.
On the other hand, the issue of nuclear liability that will make energy from the two nuclear reactors at Kerala’s Kudankulam costlier is unlikely to be resolved during this visit, experts say.
Another dampener: Reports from Moscow say Russia has again rejected tax concessions for the Imperial Energy oil reserves in Tomsk, Western Siberia, that ONGC Videsh Ltd (OVL) had acquired in 2009. The below-par yield from the reserves have pushed up costs for OVL and elicited queries in Parliament.
India has been seeking a 10-year tax holiday on export duty on Imperial Energy since 2009. The country has also sought complete exemption from a mineral extraction tax. But Russia is unlikely to grant those. According to the OVL website, during 2011-12, the output at Imperial Energy was 0.771 mt of oil, against 0.770 mt in 2010-11.
The talks between Prime Minister Manmohan Singh and the Russian President are likely to be short but intense, as the Russian side has sought the proceeding be wound up early to enable Putin to be back in Moscow before midnight, in time for Christmas.
Expected top on the list of issues would be Sistema. The telecom licence of Sistema Shyam TeleServices Ltd (SSTL), Sistema’s joint venture with India’s Shyam Telecom, was cancelled earlier this year as part of the Supreme Court order for termination of 122 licences over bribery and corruption allegations.
“The Prime Minister’s Office (PMO) is working out a solution by which Sistema may have to pay a little more for continued operations in India,” a top source in the foreign office told Business Standard. Sistema holds 56.68 per cent stake in SSTL; the rest is held by Shyam. The Russian government has 17.14 per cent stake in Sistema.
During his October visit to India, Russian Deputy Prime Minister Dmitry Rogozin had warned India not to “reconsider the rules of the game once the game has begun”.
Earlier this month, Sistema had said it would seek “billions of dollars” in damages from India if the licence cancellation issue was not resolved.
The other pacts likely to be taken up during Putin’s forthcoming visit are those for bilateral cooperation in diamond trade, pharma and tourism.
The diamond trade between the two countries had got a renewed thrust in March 2011 when the Russian state monopoly Alrosa signed five pacts with Indian firms to supply diamonds worth about $1 billion. It signed three pacts with Diamond India Ltd and two others with private sector firms, Ratilal Becharlal & Sons and Rosy Blue. The three companies are expected to buy diamonds worth over $490 million from Alrosa over the next three years.
Russia and India are also looking to hammer out a deal for supply of 42 Sukhoi SU-30MKIs and long-term supply of 970 warplane engines. This could bring in at least $7.5 billion for Russia. “The deals are expected to be announced during Putin’s trip... The price would be between $7.5 billion and $8 billion,” Ruslan Pukhov, director of the Russian defence think-tank CAST told agencies.
Also, under Russia’s Pharma 2020 programme, several pacts were signed between Russian and Indian pharma firms in 2011 alone. Trade in this sector is also likely to get a fillip with an official backing during Putin’s visit.
The contract has been put on hold and further payments have been stopped
Arvind Mayaram said IIP data suggests that corporate order books are building up