Thursday, December 16, 2010

Gorshkov Redux: Russians Demand $100-mil More To Complete Indian Frigate Order

In a Gorshkov-style jolt (though not quite on the same scale), Russia's Kalingrad-based Yantar shipyard has told Russia's Rosoboronexport that it will need $100-million more to complete the construction of three stealth frigates for the Indian Navy --Teg, Tarkash and Trikand -- follow ons to the Talwar-class frigates already in service. The follow-on deal was signed in 2006. The Kommersant newspaper indicates that a delay in delivery is also implied, so it's like deliveries won't meet their 2011-12 timeframe. It remains to be seen if the escalation is passed onto the Indian Navy, though it won't be surprising if it is.

Photo: RIA Novosti

44 comments :

Anonymous said...

What the hell are these guys upto? Does every deal with the Russians involve a "shakedown', or are the extra funds actually for some other project whose identity isn't being revealed?

Anonymous said...

Good news!!!!!!!!!!!

Still we bloody Indians don’t want to learn from our previous experience. Still we are depending on other countries.

SK

indian defence forum said...

$100-million is not very much for the frigates considering that the deal was signed in 2006.

let as not forget that the cost escalation of the scorpene submarines overshot by $1-billion & a 3-year delay to go with it, but nobody blamed the french or even raise an eyebrow.....just because it's russia everybody has joined in the chorus......let us also understand russia's grief........russia offered india the very latest Project-22-350 frigates...but india refused the offer....which led russia to develop the frigates on it's own.....requiring huge manpower & cost escalations & increase in prices of raw materials.....so quite justifiably russia has asked india to bear the extra costs..

what's so wrong in it ?????

Anonymous said...

When India was developing Shivalik class stealth frigates, it was useless to order more Talwar class frigates. India should have given order of 6 Shivalik class ships.

Anonymous said...

Perhaps the Russians are angry with our growing ties with US & other western countries.

Manish Kumar said...

No more bending backwards. Let them cancel the contract and refund back India's money. No more of fooling India

Austin said...

Shiv thats not the case , its their internal issue on price

check http://en.rian.ru/russia/20101216/161799583.html

"The lack of funding is linked to the VAT refund problem: we will only receive [the money] after the frigates have been supplied to India," Igor Orlov, the director general of the Kaliningrad-based plant, told the paper.

"We are not considering increasing the contract price for India," the source said. "We propose the problem be settled using domestic reserves, including those of the United Shipbuilding Corporation."

Anonymous said...

Serves us Indians just right.i have no one but no one to blame except ourselves.Time and again Russians have taken us for a ride and why not.........after all these years they really know our character.............another mini groshkov........God give me a break.pls

keshto said...

Contractual obligations are sacrosanct in International trade practices. Russian Redux apparently is not the first, neither its gonna be the last. Russians wont be happy till they extract the last pound of Indian flesh.

As I said earlier:

Where there are suckers, there are swindlers.......

Anonymous said...

India must give a serious thought before investing so heavily in FGFA project after this incident. This once again proved the ingenuity and necessity of indigenous projects irrespective of its cost and quality. Quality is bound to improve with increasing knowledge and research. India must develop Kaveri engine, its own fighters, and complex weapon systems on its own as you can't rely on your suppliers always which is very evident from this news. No doubt Russia has helped India enormously after the collapse of USSR since 1991 but in return India supplied much needed oxygen to the Russian military industry by purchasing huge military hardware. Now the situation is changing. Russian economy has improved much in last two decades. Now Indian money is not so much needed to them...THERE IS NO PERMANENT FRIEND OR FOE IN INTERNATIONAL RELATIONSHIP..KOUTILYA.

Anonymous said...

Just do one simple thing... Cancel all deals with the russians henceforth ...go for british or french...there people can't be allowed to take advantage of up everytime...

Anonymous said...

i think the russians undervalue their products to initially win the orders and then ask for more money... plus why blame them only.. the french did smthing very similar with the scoerpenes.... in the takeover muddle between dcns and armaris india coughed up a lot of extra money...
smells like a scam....

Anonymous said...

Seems to be a similar story on MiG-29K according to the latest edition of Strategic Affairs.

Anonymous said...

So they will come later and will be more expensive ! Usually delays means financial penalties to the supplier, but that looks to depend on who the supplier is. If it is Russia, that leads to the contrary !

AK said...

India is now like a rich widow whom everyone seems to be pounce and cheat at a moment notice. Good work India!

Mirza said...

Any more details and reason behind this?

And your view please regarding not just plain reporting

Anonymous said...

From what i read, Yantar has asked Rosoboronexport for the additional funds and not the Indian Navy...

From a legal perspective, once the contract price is settled, the seller (Rosoboronexport) would not be entitled to pass on any escalation in costs to the Indian Navy...

Of course notions such as binding contractual agreement, equity and adherence to stipulated terms go right out the window when dealing with Ivan...

Anurag said...

This is not good...........Indian gov must understand that if they want indigenisation of navy,then gov. must make a resolution that Gorshkov aircraft carrier and these Krivak-4 class frigates will be the last imported ships for IN.Similarly no more foreign submarines after Project 75i.The january 2011 defence policy must pave the way for complete involvement of private shipyards in Indian naval projects.while at the same time,efforts must be made with the help of private sectors to develop engines for ships and subs.

Anonymous said...

Hell with the Russians. Not even a single naval contract must be signed with the Russians anymore. Enough with this stupid Russian attitude.

Anonymous said...

This is ridiculous, how long we have to tolerate the whims & fancies of this Russians.
Wish someone had guts to say, "Either deliver the product at the said time, or get lost, your firm is black listed."

Anonymous said...

shiv why mislead everyone $100 million was asked by Yantar shipyard not to India but to Rosbonexport why spread rumours

Anonymous said...

this is ria novosti report people....
http://en.rian.ru/russia/20101216/161799583.html
looks quite different story

Anonymous said...

This is an internal taxation issue.Its a tax refund due on exports.Normally such is granted only on actual export.Still issue could be resolved by the Russian tax administration and Russian Govt.Nothing to do with India.

Anonymous said...

guys chill..that's only 33m extra per ship..peanuts....

the russkies may be exploiting us now..but they are reliable buddies..unlike the west...

its a small price to pay for their continued patronage.

-vishal

Anonymous said...

why is shri taxpayer not commenting on this ?

mathi man said...

@ Manish Kumar,
We cannot cancel the order and get the full refund after showing receipt baba. Beta , we are in their claws now, they will suck every last pound of flesh they can,. Again MoD doesnt have good people who can write leak proof contracts. So, I am sure the rosonboorexport will find some hole and suck that extra 100 million.

I had commented about how foolishly we have committed to FGFA and cannot help but say
"See . i had told you".

On an ending note, Britain has cut down on its defence spending good Aircraft carriers and ships in half and 75% done state are lying in british shipyards. We should GRAb this opportunity and buy them cheap.

keshto said...

Its clear from Austin´s post that its no rippoff.

Shiv, you are better off deleting this article from your site.

Mr. Ra said...

Rosbonexport has delayed the things far enough to bring in the stings of VAT. Now it does not have many options except either to take loans from India or to sell the brand new T-90 Tanks on relatively cheaper rates to India for hard cash .

ArkAngel said...

Its funny how we Indians like to blame everybody else. Favorite passtime. Oh the Americans are cheating us, oh the Russians are cheating us, the French are cheating us bla bla bla....
...FFS can we do any better????

Just look at the escalation of cost of the LCA Tejas! By some estimates its 3000%! Nearly 30 yrs since it was sanctioned & still not ready.
And is it a 100% Indian fighter? NO.
Mark 2 expected in 2018??
Yeah sure we Indians can build things on time.

Fanboys = dont like rupees wasted on foreign contracts yet at the same time wont bring themselves to admit that we need foreign technology, without which taxpayers money will go into reinventing the wheel.

ArkAngel said...

India, Russia register JV to produce transport aircraft
http://en.rian.ru/world/20101216/161809217.html

Anonymous said...

We need to be careful with def contracts. And Keshto, the biggest swindlers are our babu netas baniyas and sipahis who went to the extent of sabotaging Arjun to get their kickbacks and post corrupt babus and netas by chor baniyas in plum positions to see this multi trillion $ kickbacks keep flowing at the cost of keeping billion Indians BPL (World Bank's latest criteria there are no middleclass in India). Did you forget how cheaply that sardarji (supposed to be one of the best performers like Gen Kapoor) sold our nation's interest in the Groshkov deal? Is it any wonder that we were slaves for 1000 years? If men like Mannu and Annu become our country's PM and def minister, God save this country.

Anonymous said...

Lockheed Martin delivers India's first C-130J aircraft

http://www.business-standard.com/india/news/lockheed-martin-delivers-india%5Cs-first-c-130j-aircraft/418621/

Artanis said...

It seems like the blogger has not read the news before posting it. The ACTUAL news said -
"We are not considering increasing the contract price for India," the source said. "We propose the problem be settled using domestic reserves, including those of the United Shipbuilding Corporation."

Jonathan said...

How Typical!!! The Russians know that no matter what the stupid Indians (us) will come back to their doorstep for more overpriced hardware and spares!!!

Anonymous said...

the comments page on this website is a litany of moronic opinions. To those who say refund to hell with the ships then what will you defend the coast with, gilli danda. to those who say russians are bad hw manufacturers they dont understand that when you freeze a project you dont fvcking touch its specs , no one in the mod realizes this. These are plenty oof delayed projects everywhere cost vs performance is always in the region of diminished return. also to the blog owner stop fear mongering against russian hardware, everything has its flaws you just have to look.

Manne said...

Off topic but important:

Shiv, please can you let us know what exactly happened with BAE vis-a-vis Hawk issues? TIA.

- Manne

ArkAngel said...

Many people dont read things here! lol. They just come here to rant.
Example: anon @ 2:23 AM.

Anonymous said...

Its almost shameful to post as an annon following the above but I just had to say well done to Austin for his very well informed correction on this post.

It really should have been unessasary as even the original Kommersant article clearly states that no financial burden will be placed on the customer. This is mischief!

aatish said...

Shiv,
how mean of you.. just to get let lots of hits on the page you are twisting the story by willfully not posting the whole story. Those $100 mil are ALREADY PAID to Rosoboronexport by us, which it will release to Yantar after it finishes the job. Yantar wants them before completion. Thats it... citing cost escalation. Its between Yantar & Rosoboronexport.

Anonymous said...

By choosing a name like "ArkAngel" you have already proved where your loyalties lie. LOL! Are you posting this comment from USA????

Pankaj said...

Shiv, what is with this sensationalizing title?
So far, they have explicitly mentioned that the fund deficit is internal. ie Russians demand $100-mil more, but from Russians. But the title gives wrong impression which doesn't go off until one reads the matter. And about the last line of this small article, whether they go back on their word and pass it on to India is a different story which should be left for the think tanks in DAC. Speculation is not a journalist's job.

I feel your blog has developed a trend of encouraging intense dislike towards the Russians. I agree that post-contract cost escalations are not at all a good sign and Russians should be intimated about our stand. But given their track record, from showdown against the Seventh Fleet in '71 to refraining from condemning our Pokhran-II in '98 (when whole west was whining like hell); from the most unfeigned ToTs on the planet to the Su-30MKI's that keep our heads high, I guess the Russians at least deserves some cerebration before instant plain reporting.

Anonymous said...

Let's see: With Russians, we get low- introductory price with a high possibility for cost over-runs and delays. With US, we get higher up-front pricing and on-schedule delivery. They both make us sign some end-user agreements, but our babus and media only focus on the agreements proposed by the US. In all we get what we pay for.... higher price leads to on time delivery, when we cheap-out we get delays. Of course nothing like the home made stuff, when ever possible; but when imports are necessary, I suggest we stay away from Russians, even if it's free (eg. Gorsky).

Anonymous said...

@Pankaj,
You are mistaking USSR for Russia. Both are different entities. Post 1990s, after breakup of USSR, Russia even sold defense secrets to USA and China. Example F35 is a souped up Yak 141 and J11 is Su30. Not to mention Varyag and other two aircraft carriers for less than 20 million dollars each whereas 2.5 billion $ for one very old rusty missile cruiser cum helicopter carrier aka Groshkov. Russians of late have been screwing us in almost all defense deals. They have repeatedly been postponing delivery and raising the price beyond the contracted amount. This is working like a mafia and not a respected Govt.

Gautam said...

Seems like the wording of the article has been manipulated to evoke the most negative implication.

This is old news. The RUSSIAN articles distinctly clarify that the shipyard isn't looking to raise the contract price: what they want is an internal loan or grant from the Russian government.

Their problem is that as per the terms of the contract they won't be receiving the payment from India until after delivering the ships. And their own internal funds are running out.