Trade and Investment Cooperation between Russia and India

Positive changes occurring in Russia today, as well as its key investment advantages as compared to other markets (significant market volume, the growing economy, high level of education, comparative economic and political stability) attract foreign companies to Russia.

India has always been one of the Russia’s closest and most reliable friends and partners. The Government and business leaders of both the countries are committed to deepening cooperation in economic, trade and investment areas for the sake of growth and welfare of the people of our countries. Together we are developing framework to foster an environment conducive to technological innovation and collaboration, greater bilateral investment flows. The Year of Russia in India in 2008 and Year of India in Russia in 2009 have demonstrated the growing strategic partnership between our countries.

Retrospect


In the Soviet era, numerous facilities in key economic sectors, including ferrous and non-ferrous metallurgy, power generation, mining, oil and gas industry were built in India with USSR assistance. The USSR organised the training of Indian national personnel and developed a system of vocational and technical education to specialists for various sectors of the country’s economy.

A high level of cooperation was largely promoted by intergovernmental agreements under which the USSR granted long-term loans to India to implement consequential projects. The loan funds were used to carry out technical and economic R&D work, supply USSR-produced materials and equipment, organize business trips for specialists and train Indian national personnel. Thousands of Soviet engineers and technicians worked on Indian construction sites. India repaid the Soviet loans by its traditional export supplies of tea, coffee, spices, fabrics, ready-made clothing, etc. Cooperation was carried out on a bilateral basis, without either side’s participation in competitive tenders. Privately, elderly Indians praise the quality of Soviet equipment and the skills of Soviet specialists who worked in India in those years.

In turn, Russians remember Indian tea, fabrics, clothes, knitwear and footwear which were in high demand. Times have changed. The Soviet Union no longer exists and we live now in a completely different country. A country which has passed a long and difficult road from a socialist, command-administrative system of economic management to a market system based on competition and private enterprise.

After the fall of the “Iron Curtain,” the number of Russian tourists and businessmen traveling abroad increased manifold. Hundreds of foreign companies opened offices in Russia looking for possibilities to invest their funds and organise business in this country.

India has also changed greatly over these years. Now it is one of the world’s leading countries in terms of GDP growth and in the fields of information technologies, telecommunications, metallurgical and mining industries, automobile manufacture, space-based technologies, engineering, etc. The country has a well-developed system of higher education and vocational-technical training. Millions of skilled Indian specialists work in various countries of the world.

Current situation: Investments and projects

Today, Russia and India have to cooperate under conditions of acute competition on the global market for goods and services. Russian companies in India and Indian companies in Russia have to fight to participate in public tenders and compete with major global producers. And we have already achieved some positive results in this sphere.

Atomstroyexport is building two 1,000 MW power units at the Kudankulam nuclear power plant in Tamilnadu. The first unit of the Kudankulam Nuclear power project would start production by December this year. At the moment we are busy with preparation of contracts for construction of new units at this nuclear plant. Signed in March 2010 roadmap for development of bilateral cooperation in this sphere provides for the possibility of constructing Russian designed units at other sites in India.

Russian companies Silovye Mashiny (Power Machines) and Technopromexport provide technical assistance and supply equipment for the construction of the Sipat thermal power plant (TPP) in Chattisgarh (three power units of 660 MW each), the Barh TTP in Bihar (3 x 660 MW), and the Obra TTP in Uttar Pradesh (5 x 200 MW). Recently, the construction of the Teri hydropower plant in Uttranchal was completed (4 x 250 MW) with Russian assistance.

Russia’s AFK Sistema holding a controlling stake (74%) in the Indian telecommunications company Sistema Shyam Telelink Ltd is building a mobile phone network under brand “MTS”. Sistema is planning to invest up to US$7 billion in this project. The Pan-Indian telecom network is to be commissioned in the coming years.

In 2010 a joint venture between Russia’s major truck manufacturer Kamaz and Vectra Group in Hosur (Tamilnadu) started assembling Kamaz-6540 dump trucks with a gross weight of over 25 metric tons. It is planned that in three to four years 30% to 40% of all components for these vehicles will be produced in India. Russian heavy tractor manufacturer Promtractor is also setting up an assembling plant in India.

In February 2008, Bank VTB, a state-controlled foreign trade bank and one of the largest banks in Russia, opened an operating branch in New Delhi. We expect that this year one more Russian bank, the largest in Russia state-run savings bank Sberbank will also open its branch in India.

Russian-Indian company was set up in Orissa for the production of titanium products. It is planned that the company will annually produce 40,000 metric tons of titanium dioxide, 132,000 metric tons of titanium tetrachloride, 10,000 metric tons of titanium sponge and 108,000 metric tons of titaniferous slag. The project is partially financed from India’s rupee debt to Russia.

Russian companies participate in roads (Centrodorstroy) and gas pipelines (Stroytransgas) construction projects. The consortia with Russian OJSC Transstroy is fighting for the Rs12,000 crore tender for construction of 71 km of Metro line in Hyderabad. This list could be expanded.

Indian companies are also quite active in the Russian market. According to the data of the Federal State Statistics Service of Russia as of June 30, 2009, India’s accrued investment in the Russian economy amounted for US$1.2 billion. India’s major investment projects in Russia include 20% stake in the Sakhalin-1 oil and gas project and purchase of Imperial Energy Corporation Plc producing oil in Tomsk Region of Russia by ONGC Videsh Ltd (OVL). ICICI Bank has opened its subsidiary in Russia – ICICI Bank Eurasia.

TATA Motors organised the assembly of its light-duty trucks at the Ural Auto Motor Plant and its buses at the Volzhanin and Samotlor plants. TATA Tea is implementing projects in the Russian food industry; Dr. Reddy’s Laboratories Ltd. and Lupin Ltd. in pharmaceutical sector, Berger Paints in paints production, etc. Carborundum Universal Ltd. (Murugappa Group) has purchased an 84% stake in the Volzhsky Abrasives Plant in the Volgograd Region. Other Indian companies, including OVL, GAIL (India) Ltd, Indian Oil Ltd (oil and gas sector), Coal of India (coal mining), Reliance Industries Ltd (petrochemicals production), TATA Consultancy Services and Infosys (information technologies) are looking into investment possibilities in the Russian economy.

The recent visit of the Chairman of the Russian Government Vladimir Putin to India in March 2010 was marked by several breakthroughs, taking bilateral ties to a new high. Responding to India’s surging economy and energy needs Russia announced full support for India in all areas of civil nuclear cooperation, including the disposal of nuclear waste. This commitment was reflected in the signing of an intergovernmental agreement on cooperation on peaceful uses of nuclear energy.

Russia and India also agreed to establish a joint venture to produce navigation equipment for the Russian equivalent of Global Positioning System (GPS) – GLONASS.

Russia and India have enormous potential for developing cooperation in the areas of power engineering, including nuclear one, oil and gas, metallurgy, telecommunications, machinery and automobile industry, aircraft building, railway and water transport, fertilizers and chemicals, pharmaceuticals, agricultural and processed food products, ready made garments and textiles, gems and jewelry, infrastructure, space, science and technology, including information, bio-and nanotechnologies, banking and financial services, tourism etc.

Business infrastructure

An Indian-Russian Intergovernmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation was set up in 1992 to operate on a permanent basis. It has working groups on trade and economic cooperation, power generation, metallurgy and mines, and also on information and communication technologies. The commission will have its 16th meeting in New Delhi late this year.

In 2006 India’s Ministry of Commerce and Industry and Russia’s Economic Development Ministry agreed to establish a regular annual Russian-Indian Forum on trade and investments. This autumn the forth session of this Forum will be organized in New Delhi. The Forum discussions is usually focused on ways to develop cooperation in oil and gas, engineering, automobile manufacture, metallurgy, infrastructure, power generation, chemical industry, telecommunications and information technologies, innovations and new technologies, etc.

In 2008 the Council of Chief Executive Officers was set up with the mandate to develop a roadmap for increasing partnership and cooperation between the two countries at business level. Mr. Vladimir Evtushenkov, the Chairman of Board of Directors of AFK Sistema is the co-chairman of the Council from the Russian side and Mr. Mukesh Ambani, Chairman of Reliance Industries Ltd, – from the Indian side.

Growth of Russian-Indian trade

Trade and economic cooperation between Russia and India is developing dynamically. The Federal Customs Service of Russia reported a 7,5% increase in Russian-Indian trade in 2009 from the 2008 figure to USD7.46 billion. In January-February 2010, it grew by 40%, with a 40% increase in Russian exports and in imports. In 2009, machinery and equipment accounted for 51% of total Russian exports to India and amounted to US$3.03 billion; fertilizers for 13% (US$0.8 billion), ferrous metals and related products for 9% (US$530 million).

Major import items in 2009 were pharmaceuticals (30%, US$464 million), machinery and equipment, transport vehicles and instruments (18%, US$268 million), agricultural produce and food (11%, US$165 million) and textiles (10%, US$156 million).

Over the past five years, Indian exports of pharmaceuticals to Russia have more than doubled. Indian tea, coffee, tobacco, spices, nuts, marine products, canned vegetables (mostly gherkins) and fruit are in high demand on the Russian market. India manufactures a wide range of competitive machinery and equipment needed by Russia. The low volume of Russian imports of the above products in previous years could be explained by a lack of information about Indian producers.

In connection with the above, the activities of the Engineering Export Promotion Council of India (EEPC) at the Indian ministry of commerce and industry are praiseworthy. In 2008 and 2009, it organised a national Indian exhibition at the St Petersburg Technical Fair. The exhibitions presented over 150 Indian companies producing ferrous and non-ferrous metals, auto components, instruments, software, and other commodities. Russian business circles indicated great interest.

During the recent visit of the Chairman of the Russian Government Vladimir Putin to India the sides inked a clutch of agreements in oil exploration, trade in diamonds and fertilizers.

The Trade Representation of the Russian Federation in India

The Trade Representation of Russia in India is focused on the development and expansion of trade and economic relationship between Russia and India. It provides Russian and Indian businessmen with required market information enabling them to establish direct contacts, encourages Russian and Indian enterprises to explore new business opportunities, ensures understanding between the business communities of both countries.

Daily we receive a lot of inquiries from Russian and Indian companies and doing our best to provide them with information about business opportunities and perspective projects in Russia and India, exhibitions and conferences, tenders, potential partners to start a business, etc. We take all necessary measures to accomplish a task of increasing the two countries’ turnover up to USD 20 billion by 2015, as was agreed by the Governments of Russia and India.
We are confident that Russian-Indian long-term partnership is to grow stronger increasing its weight in global economy while our trade and investment cooperation will show considerable expansion in the years to come.

Our address: The Trade Representation of the Russian Federation in India, Plot No 6&7, Block 50-E, Nyaya Marg, Chanakyapuri, New Delhi – 110021. Tel. 26889153, 26873195, fax 26873189, e-mail: rusintrade@mail.ru, website: www.rustrade.in

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