A New India
Chapter 314 - 314: Agreement

Agreement Between the Government of India and the Government of the Union of Soviet Socialist Republics

For the Establishment and Development of the Bhilai Steel Plant

Date: 5th January 1956

Location: South Block, New Delhi, India

Preamble

The Government of the Republic of India (hereinafter referred to as "India") and the Government of the Union of Soviet Socialist Republics (hereinafter referred to as "USSR")

Acknowledging the importance of fostering industrial and economic development in India as part of its Five-Year Plans.

Recognizing the USSR's technical expertise in the field of heavy industries, particularly steel manufacturing.

Affirming the principles of mutual respect, cooperation, and shared economic progress.

Agree to the following terms for the establishment and development of the Bhilai Steel Plant (hereinafter referred to as "BSP").

Article 1: Objectives of the Agreement

1. To establish the Bhilai Steel Plant in Bhilai, India, with an initial production capacity of 1 million tonnes of steel per annum (MTPA).

2. To develop infrastructure supporting the plant, including roads, railways, power, and water facilities.

3. To promote knowledge transfer, technical training, and skill development for Indian engineers and workers.

Article 2: Commitments by the Government of India

India agrees to:

1. Provide land and necessary infrastructure for the construction and operation of the Bhilai Steel Plant, including:

Transportation links (roads and railways).

Adequate power supply and water resources.

Housing and community facilities for workers.

2. Ensure a conducive operational environment for Soviet engineers, trainers, and personnel involved in the project.

3. Bear the costs associated with local labor, raw materials, and auxiliary infrastructure.

4. Establish a technical institute near Bhilai to train Indian workers in steel production and related fields.

5. Repay the concessional loans provided by the USSR as per the agreed terms.

Article 3: Commitments by the Government of the USSR

The USSR agrees to:

1. Provide technical expertise, including designs, plans, and layouts for the Bhilai Steel Plant.

2. Supply machinery, equipment, and technology necessary for the construction and operation of the plant.

3. Deploy Soviet engineers, trainers, and technical personnel to oversee construction and train Indian workers.

4. Facilitate the establishment of blast furnaces, rolling mills, and auxiliary facilities required for steel production.

5. Share advanced production techniques and ensure the plant's adherence to global standards of quality and efficiency.

6. Offer concessional loans to India to cover the cost of machinery, equipment, and training, with repayment terms agreed upon in Annex I.

Article 4: Training and Knowledge Transfer

1. A training program will be established for Indian engineers and workers, to be conducted by Soviet experts both in India and in the USSR.

2. The program will include:

Operation and maintenance of machinery.

Steel production techniques.

Safety protocols and environmental management.

3. The technical institute near Bhilai will be jointly managed during the initial phase, with a gradual handover to Indian authorities.

Article 5: Timelines

1. Construction of the Bhilai Steel Plant shall commence no later than six months from the date of signing this agreement.

2. The plant shall become operational by December 1959.

3. Quarterly reviews shall be conducted jointly by Indian and Soviet officials to ensure adherence to the agreed timeline.

Article 6: Financial Arrangements

1. The USSR will provide concessional loans as mentioned in Annexure 1.

2. India will allocate budgetary resources to meet local expenses, including labor and auxiliary infrastructure.

Article 7: Environmental and Social Responsibility

1. Both parties agree to ensure that the Bhilai Steel Plant adopts modern pollution control measures, including dust extraction systems and water recycling processes.

2. A green belt will be developed around the plant to improve environmental quality.

3. Housing colonies, schools, hospitals, and community facilities shall be developed for workers and their families to foster social well-being.

Article 8: Future Expansion and Collaboration

1. The Bhilai Steel Plant shall be designed to allow for future capacity expansion to 10 million tonnes per annum.

2. Both parties will explore further collaboration in heavy industries, energy, and other strategic sectors based on mutual consent.

Article 9: Dispute Resolution

1. Any disputes arising from the implementation of this agreement shall be resolved amicably through consultations between the respective governments.

2. If unresolved, the matter shall be referred to an arbitration panel jointly appointed by India and the USSR.

Article 10: Validity and Termination

1. This agreement shall remain in force for a period of 10 years from the date of signing, after which it may be renewed by mutual consent.

2. Either party may terminate the agreement with six months' prior written notice, provided that such termination does not affect ongoing obligations or projects.

Signed in New Delhi on this 5 of January 1956, in two original copies in Hindi, Russian, and English, all texts being equally authentic.

Signatories

For the Government of the Republic of India

Prime Minister Rohan

For the Government of the Union of Soviet Socialist Republics

Minister of Commerce Ivan Alexeyevich

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Annexure I: Financial Terms and Obligations

This Annexure outlines the financial terms and obligations agreed upon by the Government of the Republic of India (hereinafter referred to as "India") and the Government of the Union of Soviet Socialist Republics (hereinafter referred to as "USSR") for the establishment and development of the Bhilai Steel Plant.

1. Loan Details

1.1. Total Loan Amount

The USSR shall provide a concessional loan of $300 million (USD equivalent) to India for the Bhilai Steel Plant project.

1.2. Loan Disbursement

The loan amount shall be disbursed in tranches aligned with the project phases as follows:

Phase I: Pre-Construction and Machinery Procurement – 40% of the loan.

Phase II: Construction and Installation of Facilities – 40% of the loan.

Phase III: Commissioning and Training – 20% of the loan.

1.3. Interest Rate

The loan shall carry a concessional interest rate of 2% per annum.

1.4. Repayment Period

The loan shall be repaid over a period of 20 years, commencing five years after the plant becomes operational (grace period).

1.5. Currency Exchange Guarantee

Repayments will be made in convertible currency, with an exchange rate guarantee ensuring no adverse financial impact due to currency fluctuations.

2. Financial Responsibilities of India

2.1. Local Expenditures

India shall allocate funds for:

Land acquisition.

Construction of supporting infrastructure (roads, railways, and housing).

Local labor costs.

2.2. Maintenance of Equipment and Facilities

India shall bear the cost of regular maintenance and operational upgrades required during the plant's initial operational years.

3. Financial Responsibilities of USSR

3.1. Machinery and Equipment

The USSR shall provide state-of-the-art machinery and equipment for the Bhilai Steel Plant, including:

Blast furnaces.

Rolling mills.

Ancillary equipment for steel production.

3.2. Training and Knowledge Transfer

The cost of training Indian engineers and workers, both in India and in the USSR, shall be included in the loan package.

3.3. Technical Assistance

Soviet engineers and technical personnel deployed in India during the plant's construction and commissioning phase shall be covered under the financial terms of the agreement.

4. Terms of Dispute Resolution

4.1. Any financial disputes arising during the project execution shall first be addressed through bilateral consultations.

4.2. Unresolved disputes shall be referred to an independent arbitration panel jointly selected by India and the USSR, with decisions binding on both parties.

5. Monitoring and Compliance

5.1. Joint Oversight Committee

A joint committee comprising representatives from India and the USSR shall oversee the disbursement and utilization of funds.

5.2. Quarterly Audits

Quarterly financial audits will be conducted to ensure transparency and adherence to the agreed terms.

This Annexure forms an integral part of the Agreement and shall be read and interpreted in conjunction with the main Agreement document.

For the Government of the Republic of India

Prime Minister Rohan

For the Government of the Union of Soviet Socialist Republics

Minister of Commerce Ivan Alexeyevich