February 29, 2008: India has agreed to pay an additional billion dollars to complete the refurbishment of the Russian aircraft carrier Gorshkov. In addition, India will send 500 shipyard workers, technicians and managers to Russia, to take direct charge of the work. The Russians not only demanded more money, but also admitted that a labor shortage would make delivery, in 2012, four years late. The Indian shipyard team will try to get the carrier out of the Russian yards earlier, and will also keep an eye on quality control. The Russians have also admitted that the project also suffers from shoddy workmanship. The Indians have lots of experience with this sort of thing, and the Indian workers will try to catch mistakes before the ship gets to India, hopefully in two or three years, rather than four.

The new deal will make the total cost $2.5 billion. This deal includes the purchase of the poorly maintained Russian aircraft carrier Admiral Gorshkov, and Russian shipyards performing $700 million worth of repairs, modifications and upgrades. Another $800 is to be spent on aircraft, weapons and equipment. Building a Gorshkov type carrier today would cost about $4 billion, and take several years more.

Late last year, Russia announced that it wanted a lot more money for the project. India insisted on getting what the original contract called for. The carrier is in Russia, but India, which has already paid the Russians half a billion dollars, insisted that India now owned the ship. The Indians were not happy with the situation, and the Russians are now worried about losing future military business with India if it is not all put right.

The Admiral Gorshkov entered service in 1987, but was inactivated in 1996 (too expensive to operate on a post Cold War budget). The Indian deal was made in 2004, and the carrier was to be ready by 2008. But a year ago reports began coming out of Russia that the shipyard doing the work, Sevmash, had seriously miscalculated the cost of the project. The revised costs were more like $1.1 billion for the $700 million refurb. The situation proceeded to get worse, with Sevmash reporting ever increasing costs to refurbish the carrier.

The Indians were not happy, and at first insisted that the Russian government (which owns many of the entities involved) make good on the original deal. India sent its own team of technical experts to Russia, and their report apparently confirmed what the Russians reported, about shipyard officials low-balling the cost of the work needed. This is a common tactic for firms building weapons for their own country. It gets more complicated when you try to pull that sort of thing on a foreign customer. The Russian government will cover some of the overrun cost. The Sevmash managers who negotiated the low bid are being prosecuted.

Once refurbished, the Gorshkov, renamed INS Vikramaditya, should be good for about 30 years of service. That's because, after the refit, 70 percent of the ships equipment will be new, and the rest refurbished. India wants the Gorshkov in service before 2012, because that's when it's existing carrier (the 29,000 ton INS Viraat) is to be retired.