Modi announces US$ 1 billion credit to Russia to develop its mineral-rich Far East

Vladivostok, September 5 (Hindu Business Line): Development of resources in the Far East region of Russia, where 98 per cent of diamond and 50 per cent of gold are mined, is one the top priorities for the Russian government and who if not India, an old friend and strategic partner, could lend a helping hand?

Speaking at plenary session of the 5th Eastern Economic Forum (EEF) in Vladivostok on Thursday, Prime Minister Narendra Modi said India would walk shoulder-to-shoulder with Russia in its development of the Far East for which it would extend a $1 billion line of credit.

Expanding economic cooperation is one of the key challenges for New Delhi and Moscow. In December 2014, the countries’ leaders set a goal to bring bilateral trade and investment figures to $30 billion by 2025. While two-side investments have crossed $50 billion by 2017, thanks to acquisition of Essar Oil by the Rosneft-led consortium, the pace of bilateral trade is still far from the set bar, despite the doubling of indicators over the past couple of years.

Far East Projects

Earlier this year, vice-governor of Far East Konstantin Bogdanenko said in 2018 the trade turnover of the region with India increased by 20 per cent and amounted to more than $42 million.

India’s largest state-owned companies as well as private business conglomerates have been investing in the Far East, which includes ONGC’s investments in oil and gas projects, the development of coal and gold deposits by Tata Power and Sun Group, diamond polishing factories set up recently by KGK group and M Suresh, among others.

However, experts in both countries believe the scale of these investments does not correspond to the potential of the region, nor to the opportunities or interests of Indian business.

Multiple delegations of state authorities and business from both countries have visited each other since the beginning of 2019. The latest and largest delegation of four chief ministers and over 130 companies was headed by Minister of Railways and Minister of Commerce & Industry Piyush Goyal.

Read:India, Russia agree to step up trade to $30 bn by 2025

The talks resulted in numerous MoUs, and according to sources, and a few investments projects in mining, logistics, oil and gas sectors are likely to be finalised soon.

Several Indian investors in Russia whomBusinessLinespoke to said it is most important for the investors whether they get tangible preferences and whether their investments are protected.

During the 20th summit, the two countries discussed the India-Russia Intergovernmental Agreement on Promotion and Mutual Protection of Investments, which is yet to be signed. As for the preferences, the administration of Far East region has gone a long way to create favourable conditions for investors, including 5-year tax holidays, and new proposals were made during this EEF.

“The far East has created a system of preferences with the lowest level of taxation in the Asia-Pacific region. There are several preferential regimes — analogues of special economic zones — created here, so-called “territories of advanced development.

“In addition to providing tax benefits and preferences, the government also provides all the necessary infrastructure — water, gas, roads,” Leonid Petukhov. General Director, Far East Investment and Export Agency, toldBusinessLine. He added till date, 1,786 projects worth above $60 billion have been set up here.

Also read:Modi and his elusive shipbuilding ambitions for India

According to Petukhov, Russia has introduced e-visa option for business people travelling to some of the locations, including the Far East. “More than 130 residents of India have already used e-visa,” he said.

“The political leadership in Russia and India deserve a huge amount of credit for bringing a renewed impetus on bilateral cooperation in the Russian Far East in partnership with the private sector from both the countries,” Shiv Khemka, Vice Chairman, SUN Group said.

He added thatthe Far East Investment agency has played a commendable role in the last few years in attracting foreign investment into the region.

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