Press Trust of India,
NEW DELHI: Ahead of Defence Minister A K Antony's visit to Moscow beginning on Tuesday, India and Russia in a major breakthrough, have ironed out differences over cost escalation of armament systems.
In a deal, New Delhi has now agreed to pay an annual cost escalation of five per cent as against 2.8 per cent originally worked out on all arms contracts worked out with Russia earlier.
The deal, according to top Defence officials, has paved a way for resumption of supply of fighters, warships, tanks and helicopters which had been held back.
The first major deal to be inked under the new cost escalation contract is for purchase of 40 new SU-30 MKI fighters. The new fighters would be supplied to India by 2010 and would bring the number of Sukhoi in the Indian Air Forces inventory to 230.
Under the new deal signed on Friday by top officials of the Hindustan Aeronautics Ltd and Russia's state owned arms agency Rosenbroexport, Russia has agreed to supply 40 Sukhois in semi-knocked down kits at a cost of 1.6 billion US dollars.
By agreeing to new annual cost escalation of five per cent, India would now be paying whopping USD five billion for 230 Sukhois fighters which currently are the main stay of the IAF.
India under a technology transfer agreement signed with Russia in 2000 is producing 150 Sukhoi fighters at HAL Nasik.
India has already floated its biggest ever defence tender for purchase of 126 multi-roll combat aircraft (MRCA) at a huge cost of USD 10 billion. The first of these new MRCAs are also likely to enter service by 2010-11.
Russia, citing sharp drop in US dollar rate, has been demanding 18 per cent annual cost escalation.
Defence Ministry sources said the same five per cent cost escalation would also hold good for contracts for other major armament systems like stealth warships, T-90 tank kits and admiral Groshkov aircraft carrier.
The understanding on cost escalation, which had led to some irritants in developing close defence ties between the two countries, comes close to the holding of the meeting of the joint Indo-Russians commission on military cooperation in Moscow from Tuesday.
Defence Minister A K Antony is leading the Indian delegation which also includes Defence Secretary Vijay Singh.
Antony said earlier that the issue of cost-escalation was being sorted out at number of official exchanges between the two countries.
During Antony's visit, India will also work out the issue of early supply of aircraft carrier Gorshkov and also ink a key agreement on joint development and production of a futuristic fifth generation fighter aircraft.
