Yantar, Russia's naval shipyard, has sought $100m extra funds from Rosoboronexport to complete three Talwar Class stealth frigates for the Indian Navy.
The three frigates, currently at different stages of completion, were to be delivered in 2011-12, however, the schedule was revised due to the financial problems.
Yantar shipyard CEO Igor Orlov said the lack of funding was due to the VAT refund issue, the amount of which will be settled only after the frigates have been delivered to India.
A source close to Rosoboronexport said the shipyard was not considering increasing the contract price and that the problem could be settled using domestic reserves without leading to cost escalation for India.
Russia agreed to construct the frigates for India under an original $1.6bn deal signed in 2006, according to the Business Standard.