By – Sanjay Dutta
- India is seeking a bilateral investment protection treaty to safeguard prospective Indian investments in Russia as the two countries prepare to expand economic ties
- Sources told TOI the issue of an investment protection framework was discussed at the talks between an Indian delegation led by commerce minister Piyush Goyal and Yuri Tutnev, Russia’s deputy PM, earlier this month
MOSCOW: India is seeking a bilateral investment protection treaty to safeguard prospective Indian investments in Russia as the two countries prepare to expand economic ties.
Prime Minister Narendra Modi and Russian President Vladimir Putin will put their stamp of approval on the roadmap to spur Indian investments when they meet at Vladivostok next week.
Modi is the chief guest at this year’s Eastern Economic Forum, Putin’s annual gig of world leaders and captains of industry to promote investments in the natural resource-rich far eastern region of Russia.
Sources told TOI the issue of an investment protection framework was discussed at the talks between an Indian delegation led by commerce minister Piyush Goyal and Yuri Tutnev, Russia’s deputy PM and presidential envoy to the far eastern federal district, earlier this month.
The talks were aimed at laying the groundwork for Modi-Putin discussion on facilitating flow of non-oil Indian investments into the Russian far east.
The two countries do not have a formal treaty for protecting investments in Russia. Instead, each investment plan is protected by presidential decrees assuring no change in law for a certain period, generally 10 years or so.
Several Indian companies are either doing business in Russia or have made investment commitments, including in the country’s far east. The sources said the Tata group is developing a coal mine in the far east, while another steel major has committed to investment. Industry sources in the Russian capital said the Ruias-promoted Essar group, which has deep ties with Russian businesses and sold their Gujarat refinery to a Rosneft-led consortium for $13 billion, is also searching for new business avenues with Russian companies.
Several sector-specific MoUs between the Indian states and various far eastern regions of Russia are also on anvil. The delegation-level talks also discussed setting up a unit for diamond cutting and polishing as a project to leverage India’s global leadership in this area and Russia’s role as the source of 85% of the world’s rough diamond supplies.
The architecture of these discussions has made an investment protection framework important, especially when natural resources are concerned. Changes in local laws can jeopardise economic viability of investments, especially in case of exploitation of natural resources.
For example, sources said, the Tata group’s interest in a far eastern coal block is protected by a presidential decree promising no change in law for 10 years. TOI could not immediately confirm this.
The Tata and Adani groups experienced the negative impact of sudden change in laws in regard to their coal mines in Indonesia. Changes in Indonesian coal pricing/export laws had rendered the cost of fuel unviable for the domestic power projects of these two Indian companies.
Among natural resources, investments in oil and gas project are mostly done between state-run entities as a result of government deals, and hence, enjoy deemed sovereign guarantee. But private investments do not have such cushion.