US$ 135m Russian patrol craft for Navy

President seeks Cabinet approval to purchase it on 2010 credit line

REVENUE FLOWS

A proposal from President Maithripala Sirisena, as Minister of Defence, to procure a US$ 135 million Russian- built Gepard 5.1 Offshore Patrol Vessel (OPV) is now before the Cabinet of Ministers.

To be used by the Sri Lanka Navy, this purchase is from a credit line of US$ 300 million extended to Sri Lanka by the Russian Federation on February 8, 2010.

President Sirisena has told Ministers that only a total amount of US$ 165 million has already been utilised. There was a balance of US$ 135 million not utilised until 2015 when the agreement for the credit line expired.

However, he has said that the Russian Government is willing to award the balance US$ 135 million as a new state credit for another five years to Sri Lanka. The OPV is to be purchased from state- owned military products exporter Rosoboronexport. Sri Lanka will incur a further cost of US$ 7 million for training of personnel to man the vessel.

Mr. Sirisena has said the Sri Lanka Navy has “the requirement of this kind (sic) of a ship and already given the recommendation to purchase this.” The total funding requirement, he has said, is US$ 135 million “exclusive of 15 percent of Sri Lanka Government’s contribution to the state credit together with which the total ship value including on-board spares and ammunition is US$ 158.5 million.”

The financial terms of the state credit repayment in equal instalments within ten years include a five-year grace period. The rate of interest has been placed at 4% and an “upfront fee on state credit at 1% of US$ 135 million.”

Considering the superior marine steel used by Russia, President Sirisena has said that workmanship, weaponry and sensors are similar to a Frigate class. This is why the Sri Lanka Navy has recommended it.

The President has sought the approval of the Cabinet of Ministers to direct the External Resources Department in the Treasury to negotiate “the financial arrangements of this line of credit with the Russian federation.”

Gifts of two OPVs, one from China and another from India, have already added to the assets of the Sri Lanka Navy.