VZCZCXRO0556
RR RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #3528/01 2151236
ZNR UUUUU ZZH
R 031236Z AUG 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7302
INFO RUEHCG/AMCONSUL CHENNAI 1068
RUEHCI/AMCONSUL KOLKATA 0565
RUEHLH/AMCONSUL LAHORE 4069
RUEHBI/AMCONSUL MUMBAI 0239
RUEHPW/AMCONSUL PESHAWAR 4612
RUEHIL/AMEMBASSY ISLAMABAD 3740
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMFIUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 05 NEW DELHI 003528 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR 
DEPT PASS TO USTR DHARTWICK/CLILIENFELD/AADLER 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA ABAUKOL 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
STATE FOR SCA/INS MICHAEL NEWBILL AND EB/TRA JEFFREY HORWITZ AND TOM 
ENGLE 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EINV ETRD ENRG SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS 
 
Reftel: Mumbai 00478 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of July 30 - August 3, 2007.  Contains 
Business Proprietary information. 
 
TATA RUNS INTO TROUBLE 
IN TAMIL NADU 
--------------- 
 
¶2.  (SBU) Tata Steel's $620 million project proposed Tamil Nadu 
titanium dioxide factory ran into rough weather with the state's 
opposition parties threatening protest demonstrations against the 
proposed 10,600 acre land acquisition.  With some of the ruling DMK 
party's allies also joining the opposition, a worried Chief Minister 
Karunanidhi announced that the project would proceed only after 
public hearings.  Local media seized on the Chief Minister's 
comments to pronounce the project dead and the opposition parties to 
celebrate victory.  Nonetheless, state government and media contacts 
cautioned against prematurely declaring the project dead.  Rather, 
they believe the Chief Minister's proposal for public hearings will 
buy time so that, after a delay, the project will likely move 
forward.  They noted the state government will proceed cautiously on 
the land acquisition to prevent protests, such as those that have 
plagued the proposed Tata project in Singur, West Bengal that 
ultimately spilled over into the violence in Nandigram, West Bengal. 
 
 
NEW CENTER FOR CLIMATE CHANGE 
RESEARCH IN PUNE 
------------------------ 
 
¶3.  (U) In a joint collaboration between top meteorologists and 
climate scientists worldwide, the Institute of Tropical Meteorology 
in Pune is setting up the first India-focused research center on 
climate change, likely to be named the Center for Climate Change 
Research.  The Center is expected to be operational by 2008, 
according to an article in The Mint.  The Ministry of Earth Sciences 
is leading the Pune based project in response to insufficient 
scientific data on the effects of global warming in India.  Charged 
with forecasting changes in rainfalls and temperature in India, the 
GOI also hopes the Center will contribute to policy planning and 
decisions on climate change.  Also, the GOI recently established two 
high level committees to address global climate change issues in 
India, but it was unclear whether the new Center was included in 
these discussions.  The Center is also likely to serve as a nodal 
institute for other science centers such as the Indian Institute of 
Science in Bangalore, the Indian Institute of Technology in Delhi, 
and the Wadia Institute of Himalayan Glaciology. 
 
AIR INDIA BEGINS NON-STOP 
SERVICE TO THE U.S. 
---------------------- 
 
¶4.  (U) The newly merged state carrier Air India (combining Air 
India and Indian Airlines) celebrated the launch of their new fleet 
of Boeing planes in both Delhi and Mumbai.  Air India is the first 
Indian carrier to fly non-stop to the U.S. with its new long-haul 
Boeing 777-200.  As of August 1, Air India launched non-stop service 
from Mumbai to New York.  In 2008, the carrier will commence with 
its non-stop Delhi-New York route.  The festivities in Delhi and 
Mumbai welcomed the first delivery of the largest civil aviation 
purchase in India's history by Air India and Air India Express - 68 
Boeing airplanes (including 23 777s, 27 787 Dreamliners, and 18 
737s) valued at more than $11 billion. 
 
¶5.  (U) In Delhi, Air India's Chairman V. Thulasidas showcased the 
new airplanes for Prime Minister Singh, Civil Aviation Minister 
Praful Patel, and other dignitaries, including Charge Steven White. 
Thulasidas also announced plans to order another 60 aircraft to 
replace the carrier's aging fleet and thereby meet the estimated 25 
percent annual growth in India's aviation sector over the next five 
 
NEW DELHI 00003528  002 OF 005 
 
 
years. 
 
¶6.  (U) In Mumbai, CDA White and Mumbai Consul General Owen 
congratulated Air India and the Ministry of Civil Aviation for their 
forward leaning vision and the tremendous gains from the U.S.-India 
Open Skies Agreement.  Leaders from the government, business, 
cultural, media, and political communities gathered to send off Air 
India's new Boeing 777-200LR on its first non-stop flight to New 
York. Air India officials also announced that non-stop flights from 
Delhi to Washington, DC and Bangalore to San Francisco will commence 
sometime in 2008. 
 
AMBITIOUS PLANS TO UPGRADE 
INDIA's AIRPORTS 
------------------ 
 
¶7.  (U) During a brief courtesy call with mission staff on August 2, 
Civil Aviation Minister Praful Patel discussed plans for the 
country's airports.  The Minister stated that the government is 
coming out with an order to permit operation of two airports in 
major cities in India.  "In the case of Bangalore, there might be 
some contractual obligations but that is something we can 
negotiate."  He added that while the new Bangalore airport should be 
ready by mid-2008, the ministry's order will be released before 
then.  As for modernization plans for the Chennai airport, the 
Minister expects expansion of the existing facility to be completed 
by the end of this year.  He also announced there will be calls for 
tenders for the new green field project for Chennai within the next 
couple of months and the bidders are likely to be short listed in a 
few years.  The Minister pointed out that some of the world's 
operators have expressed interest.  In the secondary cities, the 
Minister expects to have 500 operational airports by the end of 
¶2010.  As part of this development, the Ministry has commenced 
international flights from tier II cities as a first steps towards 
upgrading airport infrastructure.  The Minister said, ""I see the 
development of these facilities to be driven by us (the government). 
 The PPP model (public-private partnership as used for the Delhi and 
Mumbai airports) will not work at these locations as the business is 
not very profitable" 
 
DELL STARTS MANUFACTURING 
OPERATIONS IN INDIA 
----------------------- 
 
¶8.  (U) In July 2007, Dell rolled out the first desktop from its new 
manufacturing plant in India, built primarily to serve the local 
market.  Dell announced its intentions to develop the facility in 
September 2006 and, with substantial cooperation from the government 
of Tamil Nadu, was able to begin operations in under a year.  The 
Sriperambudur factory, just outside Chennai, is expected to reduce 
delivery time and cut costs that will be passed on to the consumer. 
According to a recent article in The Mint, the 50-acre production 
plant will have the capacity to produce 400,000 desktop PCs to meet 
the rising demand. In 2006 alone, Dell registered a growth of 76% in 
volume sales to 300,000 units, which were previously imported from 
China.  The Chennai plant will be Dell's third in Asia, after China 
and Malaysia, and is expected to employ 1000 people. 
 
RELIANCE WINS REASSIGNED SASAN 
ULTRA-MEGA POWER PROJECT BID 
------------------ 
 
¶9.  (SBU) Reliance Power Ltd (RPL) -- a subsidiary of the Anil 
Dhirubhai Ambani Group (ADAG)'s Reliance Energy Generation Ltd. -- 
won the second round of bidding on July 30 to build the $5 billion 
4,000-MegaWatt Sasan coal-fired, thermal power plant complex in 
Madhya Pradesh to be based on pithead coal and super-critical 
reactor technology.  Sasan is of one of the two already-awarded 
UltraMega Power Projects of seven projected GOI projects.  As 
reported in last weeks Economic Highlights, the previous winner -- a 
consortium of the sole foreign bidder Globeleq-Singapore and 
Hyderabad-based Lanco Infratech -- was disqualified by the Empowered 
 
NEW DELHI 00003528  003 OF 005 
 
 
Group of Ministers on July 24 due to changes in its ownership 
structure.  In the tariff-based rebidding, Reliance Power lowered 
its previous bid to 1.29 rupies (about 3.25 U.S. cents) per 
kilowatt-hour (kwh), while Jaiprakash Associates and the GOI-owned 
National Thermal Power Corporation (NTPC) did not change their 
previous offers of Rs 1.65/kwh and Rs 2.13/kwh respectively.  A 
well-placed source told Econoffs that, consortium ownership 
structure aside, the owners of Lanco lacked sufficient political 
influence to retain their original award against Reliance Power's 
aggressive behind-the-scene maneuvers. 
 
U.S. ENERGY COMPANY AES 
RECOMMENDED FOR COAL MINE 
---------------------- 
 
¶10.  (SBU) India's Ministry of Power and Central Electricity 
Authority on July 30 recommended to the coal mine Screening 
Committee in favor of allocation to 25 companies of 25 sites at 16 
coal deposits.  The sole foreign participant, U.S. power-generation 
company AES, was recommended to receive leasing and development 
rights for the 150-million-metric-ton Sayang coal deposit in 
Chhattisgarh, 250 kilometers northeast of state capital Raipur, for 
use in AES' proposed US$1 billion, mine-side  1,000-MegaWatt thermal 
power station.  Pending approval by the Screening Committee and the 
Prime Minister, the Coal Ministry is expected to award the mine 
leases by October 2007.  AES expects open-pit mine development and 
plant construction to begin by December 2008, with completion by 
early 2012.  Ambassador Mulford and Embassy's Foreign Commercial 
Service and State/Economic Section have heavily lobbied on AES' 
behalf for over a year with the GOI, Minister of Power, and Ministry 
of Coal for this allocation. 
 
RELIANCE INDUSTRIES LIMITED 
SEEKING PARTNERSHIP WITH DOW CHEMICAL 
----------------------- 
 
¶11.  (SBU) Mukesh Ambani's Reliance Industries Ltd. (RIL) -- which 
is active in petroleum and natural gas, including construction of 
the 540,000 barrel-per-day Jamnagar Petroleum Refinery in Gujurat -- 
is interested in pursuing partnerships with U.S. oil and gas 
companies, including investment in the United States, a RIL 
representative told Econoff.  In particular, Mukesh Ambani is 
seeking joint activities with U.S. chemical giant Dow Chemical.  RIL 
expects to export all of its refined petroleum products from the 
Jamnagar refinery, once it is operational, because Indian domestic 
retail prices remain controlled for political reasons, with the GOI 
providing subsidies to loss-making, GOI-owned, product- retailing 
companies.  RIL is interested in having Dow Chemicals purchase its 
refined products as feedstock for the latter's chemical processing 
and plastics. 
 
SCHEDULING INAUGURAL MEETING OF 
PRIVATE SECTOR ADVISORY GROUP 
--------------------------- 
 
¶12.  (SBU) During an August 2 meeting with USTR Deputy Assistant 
Claudio Lilienfeld, Ministry of Commerce and Industry Joint 
Secretary Anil Mukim recommended a meeting of the Private Sector 
 
SIPDIS 
Advisory Group (PSAG) in late September, on the margins of the CEO 
Forum in New York.  Lilienfeld offered to convey the proposal to 
Washington.  They also touched on Indian Commerce Secretary Pillai's 
proposed visit to the U.S. in September to resume ongoing bilateral 
trade discussions. 
 
¶13.  (SBU) Mukim also raised the WTO's recent hearing of a case 
filed by India against new bond rules imposed by the United States 
on Indian shrimp exports.  The panel is expected to give its final 
verdict in September 2007.  Mukim commented that the proposed 
compromise by the U.S. government to Indian shrimp farmers, outside 
of the WTO process, is inadequate. 
 
¶14.  (SBU) On the issue of social security totalization, Mukim 
 
NEW DELHI 00003528  004 OF 005 
 
 
highlighted the importance of resolving this issue for the thousands 
of temporary Indian workers in the U.S.  Lilienfeld explained that 
the USG is looking at how to respond to this request, to revive 
prospects of experts' dialogue, and that the issue would likely be 
raised at the CEO Forum. 
 
MOMENTUM FOR LEGAL SERVICES 
WORKING GROUP 
---------------- 
 
¶15.  (SBU) On August 2, Ministry of Commerce and Industry Joint 
Secretary Jayant Dasgupta discussed the services focus group of the 
 
SIPDIS 
TPF with USTR Lilienfeld.  Dasgupta highlighted a planned meeting on 
August 4 with the Indian Bar Council and corporate law 
representatives to discuss a way forward on the legal services 
working group.  While Dasgupta noted that the Indian Bar Council has 
been resistant to opening up legal services to U.S. players, he was 
hopeful that with a new head at the Indian Bar Council, it may be 
possible to finally get the working group off the ground. 
 
AJAY SHANKAR REPLACES AJAY DUA 
AS DIPP SECRETARY 
-------------------- 
 
¶16.  (U) On August 1st Ajay Shankar, 58, replaced Ajay Dua at the 
Ministry of Commerce and Industry as the Department of Industrial 
Policy and Promotion (DIPP) Secretary.  He is known for his 
pro-liberalization views.  As DIPP Secretary, Shankar will Chair the 
Innovation and Creativity Group of the Trade Policy Forum.  His 
department is the nodal point for all IPR related policy and 
implementation issues (including bilateral cooperation efforts to 
improve IPR climate in India), as well as secretariat of foreign 
direct investment approvals.  Before becoming DIPP Secretary Shankar 
was Principal Advisor (water resources/environment/state plans) in 
the Planning Commission.   Prior to this he was Additional Secretary 
in the Ministry of Power.  As Joint Secretary in-charge of Power 
Sector Reform, Shankar played a crucial role in the finalization of 
India's electricity legislation, the Electricity Act, 2003.  He 
holds post-graduate degrees in economics from Georgetown University 
and in political science from the Allahabad University. 
 
Ministry of Finance Pursuing 
Opportunistic Reforms 
---------------------------- 
 
¶17.  (SBU) In a meeting with econoff and U.S.T.R. Deputy Assistant 
Claudio Lilienfeld on August 3 (more septel), Ministry of Finance 
Joint Secretary K.P. Krishnan struck a new theme on economic 
reforms, introduced by the Finance Minister in a speech earlier in 
the week.  Both Minister Chidambaram and Krishnan noted that 
political constraints on the ruling coalition have stalled several 
key economic reforms in Parliament (note: for example, liberalizing 
the banking and pension sectors.  End note).  Given that, the 
Ministry is now explicitly focusing on what it terms "opportunistic" 
reforms - tactically identifying windows of opportunity to push 
through incremental or partial reforms that otherwise are resisted. 
 
 
¶18.  (SBU) Krishan offered an example, pointing out that currently, 
India does not have a currency futures market.  Recent high capital 
inflows may provide an opportunity to reach relatively rapid 
consensus on allowing currency futures trading, since the trading 
could mitigate excess liquidity and pressure on the rupee to 
appreciate (see reftel for more on this monetary challenge). 
Krishnan used another colorful metaphor to illustrate the Ministry 
of Finance's perspective on what reforms are possible.  He termed 
the Ministry's use of executive ordinances to inaugurate a new 
government pension system the equivalent of "bypass surgery" since 
the Ministry worked around stalled legislation.  The colorfully 
delivered message from Krishnan and Chidambaram is that the Ministry 
of Finance continues its commitment to reform and is seeking to be 
more creative in its efforts. 
 
NEW DELHI 00003528  005 OF 005 
 
 
 
¶19.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE