The lack of funds has delayed the completion of three frigates for India under the $1.6 billion deal signed in 2006, which were to be delivered beginning next year, Kommersant business daily said.
"The lack of funding is linked to the VAT refund problem: we will only receive the money after the frigates have been delivered to India," CEO of Kaliningrad-based Yantar shipyard Igor Orlov was quoted as saying by Kommersant.
However, the extra funds required by Yantar to complete frigates to be commissioned as the INS Teg (sabre), Tir (arrow) and Tarkash (quiver) will not lead to the cost escalation for India, the daily said quoting sources.
Yantar was to deliver the three frigates currently under different stages of completion in 2011-12. However, due to the financial problems the delivery schedule could be revised.
"The Indian side was aware of the issue and was treating it with understanding," a source close to the state arms exporter - Rosoboronexport -- was quoted as saying by the daily.
"We are not considering increasing the contract price for India. We propose to settle the issue with the help of domestic reserves, including those of the United Shipbuilding Corporation," an unnamed Rosoboronexport source said, underscoring that there will be no repetition of Gorshkov story, which led to the doubling of initial cost of the deal.