India, Russia ties hit BIPPA hurdle once again

During Putin's visit, the Russian side insisted India share a copy of its new draft which the govt plans to introduce. India was not yet ready and asked for more time

Russian President Vladimir Putin’s visit to India earlier this month was not all that smooth. It did have its share of tensions, with the Russian side pressing for an urgent solution to some of its big projects stuck here for a long time in the absence of a new Bilateral Investment Promotion and Protection Agreement (BIPPA).

During the visit, the Russian side insisted India share a draft copy of new BIPPA which the government plans to introduce.

However, India was not yet ready with the template and asked for more time to hold the discussion, officials in the ministry of external affairs (MEA) told Business Standard on condition of anonymity.

India and Russia signed a BIPPA in 1994, which came into force in 1996.

However, since two of its big projects — Titanium Products Private Ltd and Sistema — got stuck here, Russia has been insisting on revising the agreement as it feels the old pact did not protect its investors enough.

Notably, Russia has shared its own draft agreement with India. The matter was discussed during the summit-level meeting between Putin and Indian Prime Minister Narendra Modi.

Modi has apparently asked the finance ministry, in charge of BIPPA, to “quickly solve the matter in the interest of foreign investors,” said an official.

A meeting on this issue had been pending for a long time with India postponing it. During a review meeting by the principal secretary to the PM on November 20 to take stock of the pending issues between the two countries, it was decided the draft BIPPA would not be shared with Russia until it was finalised.

BIPPA TROUBLE

• India and Russia signed a Bilateral Investment Promotion and Protection Agreement in 1994, which came to force in 1996
• But ever since two of its big-ticket projects — Titanium Products Pvt Ltd and Sistema — got stuck here, Russia has been insisting on revising the agreement as it feels the old pact did not protect its investors enough
• Prime Minister Narendra Modi has apparently asked the finance ministry, which is in-charge of BIPPA, to “quickly solve the matter in the interest of foreign investors,” said an official
• A meeting on this issue had been pending for a long time with India postponing it
• During a meeting on November 20, it was decided that the draft BIPPA would not be shared with Russia until it was finalised

However, it now seems that the department of economic affairs in the finance ministry has been asked to send a formal reply to the Russians on their request for the draft India-Russia BIPPA.

Russia has been urging India for recovering the money it had invested in a joint venture to produce titanium here.

The plan was stuck during commercial negotiations. However, India plans to propose an out-of-court settlement and ask the Indian partner in the joint venture, Indian Rare Earths, to refund the Rs 50 crore it has been paid. At the moment, the issue is under arbitration here.

Russia has threatened it might go for international arbitration. The total investment made by the Russian government for the project is Rs 250 crore. The joint venture —Titanium Products Private — was formed in 2008 but by 2009, both partners called it quits. Similarly, in the case of its telecom major Sistema, which entered into a partnership with Shyam Telecom, Russia feels the present BIPPA failed to protect its company during the 2G spectrum licence imbroglio.

Although Russia had said it might go for an official complaint on the matter by invoking the BIPPA, it did not do so pending India’s overhaul of its BIPPA model. At present, India has 72 BIPPAs with 82 countries.