Speedy Settlement Urged Of Rupee-Linked Defence Debt

A discussion on accelerated settlement of Indias rupee-denominated defence debt is expected to figure prominently during Prime Minister H D Deve Gowdas talks with Russian leaders. Indias defence outstandings to Russia stood at Rs 25,602 crore till calendar 1996.

However, the net defence debt owed to Russia has declined over the past three years, dipping from a high of Rs 30,177 crore in 1993 to Rs 28,735 in 1994, Rs 27,603 crore in 1995 and Rs 25,602 crore in 1996.

Sources said the Russians have proposed that a part of the debt could be cleared in hard currency, while the remainder could be cleared through Indian exports to Russia. Fresh defence imports by India could be paid for through a combination of hard currency, rupee trade and long-term hard currency loan, they added.

 

The Indian government favours continuation of rupee trade for defence purchases as this would mean less outgo of hard currency from India and assured business for both Indian and Russian companies.

Russia is Indias main supplier of defence hardware, with purchases of spares and sub-systems amounting to over Rs 1,000 crore every year.

The defence trade was carried on at extremely advantageous terms for India before 1992, while the Soviet Union existed. After a defence equipment supply squeeze in 1992-93 adversely affected Indian defence preparedness, the Russian government agreed to maintain supply at previously agreed rupee terms.

However, the terms do not always apply to new purchases. For example, India has paid $200 million as advance payment for 40 Sukhoi-30 aircraft, worth $ 1.8 billion. India is expected to pay nearly 25 per cent of this amount in hard currency, while the balance will be raised through a long-term loan.