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Gorshkov to Vikramaditya: Costliest albeit Priceless “Free Gift” Featured

  • Saturday, Nov 02 2013

 New Delhi: Thirteen years ago India struck a package deal with its “time tested friend” Russia, which was to prove the costliest, although according to many commentators termed as priceless “free gift” ever presented in the history of Independent India.  

An  Inter  Government  Agreement was  signed  with  Russia in October 2000 for  acquisition  of ship Admiral Gorshkov,,  a modified  Kiev  class heavy cruiser Russian Navy as part of a “package deal”. 

And the package deal included the ‘gift’ of the cruiser to the Indian Navy (IN) with payments being  made only for the Repair and Re­equipping (R&R) to be undertaken to convert the  cruiser  into  an  aircraft  carrier  and  for  the  acquisition  of  16 Mig 29K fighter  aircrafts for the carrier. After 4 years of protracted discussions, the acquisition of the 45 thousand tons of cruiser was approved  by  the  Finance Ministry in January  2004. The total outlay of the project sanctioned in January 2004 was 1,854,103,201  US dollars which included refit and re­equipment cost of 875,040,318 USD and  the cost of Fighter Aircraft  of 879,826,880 USD.

The  R&R  of  the ship  was  the  most  significant  element  of  the  package deal agreement as this would determine the ultimate availability and capabilities of the aircraft carrier delivered.  Out of the total 2,500 compartments spread over  nine  decks  on  the ship,  1,650  would  either  be  newly  created  or extensively  modified. Thus, almost two third of the ship was to be renovated. 

Ten  months  before  the scheduled  date  of  delivery,  in  October  2007,  Russins given a rude shock to India by requesting extension  in  the  delivery  schedule  by  52  months i.e till December 2012 and for an increase in the contract cost of the Carrier  by  USD  1.2  billion that was around 137  per  cent  increase.

According to rough esitmates as of May 2008, preliminary work to be undertaken on the ship  had  mostly  been  completed.    However, major  items  of  work  like cabling, mounting of structures etc. were still underway, the vessel was not undocked and various acceptance trials were yet to begin. 

Incidentally, when Indian Navy agreed to award the contract worth USD 875 million in 2004, total revenue of Sevmash Shipyard, where the vessel was to undergo repair and re-equipment work, was just USD 81 million.

In between, Indian side made no defaults in payment and USD 407.05 million, representing 66 per cent of the contracted cost 

had been paid the vendor, although the repair job had come to stand still in August,2007  after completion of about 35 per cent  of the work over all.

The most substantial increase of USD 522.57 million, was on account of  sea  trials.  The  cost  of  the  trials  as  originally  contracted  was 

USD  27  million but it had  increased  by  almost  twenty  times  to  USD  550  million.

Due to delay in delivery of the carrier, Indian Navy was forced to  continue deputation of 45 members team of officials in Russia beyond 2008 which, according to rough estimates resulted  in  extra  expenditure  of  more than Rs  25.56  cr. And these expenditure were never accounted for.

 

Finally India settled the deal in 2.32 billion dollars for the carrier which originally was a ‘gift’ to a strategic friend. 

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