VZCZCXRO6300
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #5230/01 3411213
ZNR UUUUU ZZH
R 071213Z DEC 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 9591
INFO RUEHCG/AMCONSUL CHENNAI 2029
RUEHCI/AMCONSUL KOLKATA 1352
RUEHLH/AMCONSUL LAHORE 4227
RUEHBI/AMCONSUL MUMBAI 1131
RUEHPW/AMCONSUL PESHAWAR 4701
RUEHIL/AMEMBASSY ISLAMABAD 4263
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
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS SECTION 01 OF 03 NEW DELHI 005230 
 
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 CLILIENFELD/AADLER 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA ABAUKOL 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
STATE FOR SCA/INS AND EB/TRA JEFFREY HORWITZ AND TOM ENGLE 
 
E.O. 12958: N/A 
TAGS: EFIN EINV EPET ETRD SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
DECEMBER 3-7, 2007 
 
NEW DELHI 00005230  001.2 OF 003 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of December 3-7, 2007. 
 
INVESTMENTS KEEP ROLLING 
INTO SOUTH INDIA 
------------------ 
 
¶2. (U) Seeking to take advantage of Tamil Nadu's revised industrial 
policy, both Dell and Nokia announced expansion plans in the state 
this week. A senior Dell official announced on December 4 that the 
company will invest USD 30 million in its existing facility in 
Chennai, which will allow it to produce an additional 500,000 
desktop computers per year. Not to be outdone, Nokia announced on 
December 6 an additional investment in its Chennai manufacturing 
facility of USD 75 million, along with a planned increase of its 
employees, who will total 30,000. 
 
¶3. (U) New investors also are arriving in South India, with European 
companies Asea Brown Boveri (ABB) and Skoda announcing plans to 
establish equipment manufacturing facilities.  ABB plans to invest 
USD 100 million to establish a facility at Bangalore to manufacture 
low-voltage and power electronics.  Skoda plans to establish a steam 
turbine manufacturing facility in Hyderabad with an investment of 
EUR 50 million euros (USD 73.5 million). 
 
COMMUNICATION PROBLEMS STALL 
SURVEILLANCE SATELLITE LAUNCH 
------------------ 
 
¶4. (SBU) The launch of an Israeli surveillance satellite on board an 
Indian Space Research Organization (ISRO) launch vehicle is facing 
continuing delays, according to press reports.  An ISRO official 
told Consulate Chennai that engineers had not yet resolved 
communications problems between the satellite and Indian receivers, 
adding that discussions to resolve the issue were ongoing.  He said 
that the satellite was already mounted on the launch vehicle, which 
was ready for fueling.  He speculated that the delay in the launch 
of the Israeli satellite may make it difficult for ISRO to launch 
its Chandrayaan-1 lunar explorer on schedule in April 2008. 
 
RELIANCE PULLING BACK 
ON FRESH PRODUCE 
------------------ 
 
¶5.  (U) The Economic Times reported Sunday that Reliance Retail is 
planning to reduce the space it dedicates to fruits and vegetables 
in its Reliance Fresh outlets.  In some states, including Orissa, 
Reliance Fresh will not sell fruits and vegetables at all.  The move 
is partly in response to the many protests by small retailers and 
middlemen against Reliance in the past several months and partly due 
to Reliance's inability to establish an effective supply chain. 
 
GOI LIKELY TO REDUCE 
PEAK TARIFFS AGAIN 
------------ 
 
¶6.  (U) Media reports cite senior government officials as indicating 
that for the fourth consecutive year peak tariffs on a wide range of 
industrial goods will be reduced, bringing the expected peak rate 
down in FY2008 from 10 percent to 7.5 percent.  The FY2008 budget 
will be announced on February 28, 2008.  For the last fiscal year 
(FY2007), the headline non-agricultural goods tariffs were reduced 
from 12.5% to 10% (this 'peak' rate essentially is the applied rate 
on approximately 90% of Indian non-agricultural market access or 
NAMA tariff lines that are not sensitive and hence has a different 
meaning than tariff 'peak' terminology used in the WTO).  The 
proposed move, if implemented, would be in keeping with the GOI's 
stated desire to approach ASEAN tariff levels of 4.5-5.5 percent in 
¶2010. 
 
¶7.  (U) Industry is already arguing against further reductions, 
citing the rising rupee as an already formidable headwind to 
 
NEW DELHI 00005230  002.2 OF 003 
 
 
domestic manufacturers, which some argue would be exacerbated by 
additional tariff reductions.  FICCI, in particular, has already 
come out publicly against such moves.  We assess however that the 
GOI is likely to follow through with a peak tariff reduction in 
February 2008, while continuing to keep key sensitive industries 
protected by prohibitive tariff peaks. 
 
INDUSTRY PROTESTS AGAINST 
NEW M&A PROVISIONS OF 
COMPETITION ACT 
----------------- 
 
¶8.  (U) Indian industry officials have raised concerns with the GOI 
that the new Competition Act could impact local and cross-border 
mergers and acquisitions (M&As) decisions by the business community. 
 Certain provisions of the Competition Act, per the PHDCCI (a 
regional industry group representing north Indian states), imply 
discretionary powers to the Competition Commission of India (CCI). 
Industry's principle concern is the threshold on assets and turnover 
which requires CCI approval on M&As within 30 days of signing the 
deal.  Industry officials point out that most of the well-known 
companies and innumerable group companies are feared to come under 
the CCI scrutiny as a result of these stipulations.  Another 
contention is that the GOI has adopted a mandatory approval regime 
without first putting a voluntary regime to test. 
 
¶9.  (U) Moreover, businesses are concerned about the 210 to 270 day 
wait period for M&A clearances which will considerably slow down 
financial activity since a seller will not wait that long for 
approval and may opt to rescind the offer.  Acting Chairman of CCI, 
Vinod Dhall, however, has reportedly said the CCI was planning a 
three-stage framework so that most of the cases (around 85 percent) 
will be cleared within 30 to 60 days and only complicated cases will 
go to the next stage.  Another provision industry is finding hard to 
digest concerns cross-border M&As, which fall under the purview of 
the new provisions, even if there is no presence in India.  The 
Competition Act defines acquisitions very broadly without 
thresholds, leaving all acquisitions open for CCI scrutiny, thus 
leaving it to the discretion of the CCI, claim industry analysts. 
 
¶10.  (SBU) American Bar Association's (ABA) Sections of Antitrust 
Law, Business Law, and International Law, in their submission to the 
GOI have cautioned that the new Act in its current form is likely to 
discourage competitive conduct and investment in India.  Sharing 
their concerns with the local industry, the ABA recommended that 
India consider appropriate further amendments which address 
legitimate concerns by industry and foreign governments, including 
the seven-month long waiting period for approval of M&As, the burden 
of notification for non-problematic transactions, and the ambiguous 
and restrictive provisions on notification procedures. 
 
US FIRMS JOIN HANDS 
WITH INDIA's AIRWORKS 
--------------------- 
 
¶11.  (U) New York-based private investment firm Global Technology 
Investment and construction firm Punj Lloyd Limited have purchased a 
33 percent stake each in Airworks India.  Airworks is one of the 
oldest family-owned aircraft maintenance firms in India.  The Menon 
family, which owns Airworks, will retain the balance 33 percent 
stake. The two investors are putting in close to USD 25.5 million to 
revive the Mumbai-based company that now plans to expand its 
operations into other areas of aviation infrastructure and services. 
 Airworks is also planning to provide maintenance repair and 
overhaul (MRO) services for the airlines, for which there is great 
demand in India but only a few providers. 
 
HOUSTON AIRPORT EYES 
NOIDA AIRPORT PROJECT 
--------------------- 
 
¶12.  (U) Jaypee Group may partner with US based Houston Airport 
 
NEW DELHI 00005230  003.2 OF 003 
 
 
System (HAS) in its bid to build the proposed airport at Zevar in 
Greater Noida in Uttar Pradesh (UP).  Jaypee Associates is eager to 
enter airport construction, and the Jaypee Group is planning to bid 
for airports in other metro and smaller cities as well. Houston 
Airport System, the fourth-largest airport system in the United 
States and the sixth-largest in the world, operates three facilities 
in Houston - George Bush Intercontinental Airport, William P. Hobby 
Airport, and Ellington Field. 
 
¶13.  (U) Plans for the Greater Noida Airport are still uncertain and 
the proposal is with the Union Cabinet pending a decision.  GMR, the 
group developing Delhi's Indira Gandhi International Airport (IGIA), 
has opposed setting up a new airport in Greater Noida.  GMR fears 
the new Noida airport, located less than 72 km from Delhi's airport, 
will divert traffic from IGIA, rendering the latter economically 
unviable. 
 
¶14.  (U) New Delhi based Parsvnath Developers is also planning to 
form a consortium with a Turkish airport operator TAV Airports 
Holding and IL&FS Transport Network Limited (ITNL) to bid for the 
Greater Noida airport project. 
 
THE PERENNIAL PROBLEM 
OF FOG IN DELHI 
--------------------- 
 
¶15.  (U) With the onset of winter, Delhi airport authorities are 
gearing up to avoid disruption of air traffic due to foggy 
conditions. According to Airport Director R K Jenamani, about 150 
hours of disruption of services is expected from December to 
February 2008 with runway visibility falling to less than 50 meters. 
 Last winter, flight operations were disrupted seven times when the 
Runway Visibility Range (RVR) went below 50 meters while Low 
Visibility Procedure (LVP) was initiated 30 times when the RVR went 
below 800 meters. 
 
¶16.  (U) Directorate General of Civil Aviation (DGCA) has issued 
guidelines to airlines, airport authorities, and the meteorological 
department to gear up for the winter fog.  According to press 
reports, the LVP prepared for the aircraft operations up to CAT IIIB 
visibility conditions at Delhi's Indira Gandhi International (IGI) 
Airport will be strictly followed by all the agencies at the 
airport. 
 
¶17.  (U) The meteorological department will provide the airport with 
weather updates every six hours while the air traffic controller 
(ATC) will provide the aircraft with an estimated time of arrival 
instead of just a number in the queue. There will also be more 
coordination between the apron control and the ATC to avoid extended 
flight delays.  Andrew Harrison, chief operating officer for Delhi 
International Airport (DIAL), stated, "We have asked airlines to 
keep the airport informed of the delays in flights apart from 
rostering Cat III b compliant pilots for the Delhi routes in order 
to avert any delays and disruptions during fog operations." 
 
¶18.  (U) Mindful of last year's mismanagement of flight delays at 
the airport during the winter months, the DGCA and airport 
authorities claim things will be better this year. 
 
¶19.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD