In what has been dubbed as a "breakthrough deal," India and Russia have agreed to set up a joint venture to produce titanium dioxide, a key component for the strategic metal used in aerospace industry.
"Russian Deputy Finance Minister Sergei Storchak and his Indian counterparts signed a breakthrough deal in Washington to invest the rupee portion of India's debt to the Soviet Union into a titanium dioxide production," Kommersant daily reported.
Under the agreement, rupee debt equivalent of USD 126 million would be invested to build a plant in India with the annual capacity of 40,000 tonnes of titanium dioxide within the next three years in which Russia is to hold 55 per cent equity.
Back in March 2006, Russian Prime Minister Mikhail Fradkov suggested using the debt money for investment projects, an idea that President Vladimir Putin supported during his visit to India this January.
During Putin's India visit, Russian Vnesheconombank, Technochim-Holding and Indian Saraf Agencies had inked the titanium JV deal to be financed through debt rupees.
Storchak told the media that the project will finally transform the system of the return of the Indian debt that India estimates at USD one billion while Russia deems it to be three times as much.
The parties, however, agree on the USD one billion rupee portion of the debt that Russia is going to spend on investment projects in India. (More)
Storchak said that, however, general exchange of letters covering the investment of whole of rupee debt could not take place due to India's radically liberalised stance.
"Indian Finance Ministry has refused to play the role of a 'traffic light' and has allowed the blanket permission for the JVs as long as they are within the legal grounds, it is a major step towards liberalisation, but we were not ready for it," Storchak told the daily.
The Russian Deputy Finance Minister said the Indian deal could be used as an example in reviewing relations with other debtors of Russia, including Pakistan where debt talks broke down last week during Prime Minister Fradkov's visit.