VZCZCXRO5983
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #0189/01 0181158
ZNR UUUUU ZZH
R 181158Z JAN 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 0073
INFO RUEHCG/AMCONSUL CHENNAI 2288
RUEHCI/AMCONSUL KOLKATA 1603
RUEHLH/AMCONSUL LAHORE 4269
RUEHBI/AMCONSUL MUMBAI 1397
RUEHPW/AMCONSUL PESHAWAR 4736
RUEHIL/AMEMBASSY ISLAMABAD 4448
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 06 NEW DELHI 000189 
 
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 
JANUARY 14-18, 2008 
 
NEW DELHI 00000189  001.2 OF 006 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of January 14-18, 2008. 
 
VERIZON RECEIVES LONG 
DISTANCE LICENSES 
------------------ 
 
¶2.  (SBU) U.S. Telecom company Verizon Business announced on January 
9, 2008 that India's Ministry of Communications and Information 
Technology (MCIT) Department Telecommunications (DOT) had finally 
issued to Verizon Business India -- a joint venture between Verizon 
Business and Mumbai-based Videocon Group -- an International Long 
Distance (ILD) license (applied for on February 7, 2007) and a 
National Long Distance (NLD) license (applied for on May 21, 2007), 
both of which were approved on November 9, 2007.   AT&T also 
provides ILD and NLD in India.  Verizon already holds an internet 
service provider (ISP) license and has various local internet 
protocol (IP) hubs.  Verizon said the licenses "enhance Verison 
Business' delivery of advanced telecommunications services to 
multinational companies with operations in India, as well as to 
India-based multinationals."  Verizon has expressed its gratitude to 
the Embassy and FCS for their advocacy efforts. 
 
NEW ADVISOR TO FINANCE MINISTER 
CHIDAMBARAM 
-------------------------- 
 
¶3.  (U) Effective January 15, well-known economist Dr. Shubhashis 
Gangopadhyay has been appointed the new advisor (Secretary level 
rank) to Finance Minister Chidambaram, replacing Dr. Shome who 
resigned last month and is joining the United Kingdom's Tax 
Department as chief economist.  Gangopadhyay, recognized as a 
development economist, was previously founder-director of India 
Development Foundation, a privately funded, non-profit research 
foundation, since 2002. He has been a visiting fellow to a number of 
foreign universities including Gothenburg, Rutgers, Stockholm and 
Southern California. A PhD in Economics from Cornell University, 
Gangopadhyay was a faculty member at the Indian Statistical 
Institute, Kolkata between 1991 and 2002. He is a member of the 
World Bank's South Asia Chief Economists' Advisory Council and is 
also on a UN Expert Group on equitable development. He writes 
extensively in international journals on economics and finance and 
has authored a number of economic books.  Press reported that 
Shome's decision to quit the Finance Ministry mid-way through his 
tenure was largely due to his uncomfortable relationship with 
secretary-level bureaucrats who did not approve of Shome sending his 
 
SIPDIS 
reports directly to the finance minister.  Post will try to monitor 
whether similar tensions arise with another non-bureaucrat adviser. 
 
CONFERENCE ON EU-INDIA FTA REVEALS 
AMBITION, SKEPTICISM 
-------------------- 
 
¶4.  (U) During a conference at the Observer Research Foundation in 
New Delhi on January 11, Carlos Bermejo-Acosta, Chief of the 
Economic and Trade section of the European Union (EU) delegation, 
said that the EU is targeting an ambitious free-trade agreement 
(FTA) with India.  Bermejo-Acosta said that the EU will not settle 
for an agreement that simply lowers tariffs, insisting that any 
feasible deal must encompass non-tariff barriers to trade, as well 
as related policy issues, such as intellectual-property legislation 
and enforcement.  He added that the EU will not impose a timeline on 
the negotiations. 
 
¶5.  (U) A pair of economists from the European Center for 
International Political Economy, Fredrik Erixon and Razeen Sally, 
then enumerated the many reasons to be skeptical about the potential 
for an EU-India FTA.  Erixon noted that the EU does not have a clear 
mandate on services or a centralized policy on investments.  Sally 
focused on India's poor history with FTAs, labeling India's record 
of establishing meaningful agreements "the worst in Asia." 
(Comment: Post falls on the side of skepticism on these 
 
NEW DELHI 00000189  002.2 OF 006 
 
 
negotiations.  We feel that India does not have a genuine interest 
in forging deep, meaningful FTAs at the present time.  End 
comment.) 
 
BANGALORE WATER SUPPLY AND 
SEWERAGE BOARD PROJECT 
-------------------------- 
 
¶6. (U) The Bangalore Water Supply and Sewerage Board (BWWSB) has 
submitted a USD 114 million proposal to the Ministry of Urban 
Development's Jawaharlal Nehru National Urban Renewal Mission for 
implementing a wastewater recycle and reuse plan in the city to meet 
its increasing fresh water demand. If approved, once implemented, 
the mission will provide 80 percent of the total project cost 
(approximately US $ 92 million) to the utility, with the urban 
utility raising the remaining 20 percent from either internal 
accruals or from other sources.  According to the BWWSB Chairperson, 
this proposal has already received preliminary approval from the 
Central Public Health and Environmental Engineering Organization, 
the technical arm of the central ministry. 
 
¶7.  (SBU) BWSSB is reputed to be one of the better performing water 
utilities in the country.  It is also working on a USD 125 million 
proposal for reducing unaccounted water losses in the city's water 
supply system.  Both of these projects are likely to provide 
significant export opportunities for U.S. providers of wastewater 
recycle and reuse as well as leak detection and control 
technologies/systems. 
 
ROCHE PATENT GRANTED IN INDIA UNDER REVIEW 
AFTER REJECTION IN U.S. 
------------------------------------------ 
 
¶8.  (SBU) Business daily The Mint reported Tuesday that India's 
Controller General of Patents is conducting an inquiry into the 
Chennai Patent Office's grant of a patent to Roche's anti-infection 
drug, valganciclovir, which Roche sells under the name Valcyte.  The 
same drug was refused a comprehensive patent in the U.S. in 1994, on 
grounds that the drug was neither novel nor non-obvious, though the 
USPTO did grant a patent for the crystalline form of the drug.  The 
Mint quoted a Roche representative as saying that the U.S. rejection 
is not relevant because of differing patent laws.  However, Roche 
declined to comment on the fact that Indian Patent Law prohibits the 
patenting of any drug invented prior to 1995.  (Comment: Roche has 
previously been the subject of some suspicion because it has won 
patents for drugs believed to be only incremental innovations, while 
other companies, such as Novartis, have had similar patents 
rejected.  End comment.) 
 
WORLD BANK FINDS COLLUSION BETWEEN 
INDIAN DRUG COMPANIES 
------------------------ 
 
¶9.  (U) Indian drug manufacturers Nestor and Pure Pharma were found, 
in a review by the World Bank, to have colluded to win contracts for 
three major healthcare projects, the Reproductive and Child Health 
project, the Malaria Control Program, and the TB Control Program. 
In each case, the companies' bids for drugs differed by less than 
one tenth of a rupee (2.5 cents) per unit, with the differences 
"symmetrical and rotated."  The two companies also failed to deliver 
promised quantities of drugs and even diluted the content of drugs 
to reduce costs.  Although both companies had been debarred by the 
GOI from another health scheme for producing substandard drugs, they 
remained able to secure no-objection certificates from the World 
Bank to bid on projects because the list of debarred manufacturers 
was not publicly available. 
 
WEST BENGAL AI OUTBREAK MAY AFFECT 
SOUTHERN FARMERS, TOO 
----------------------- 
 
¶10. (U) While poultry farmers in West Bengal worry about the 
 
NEW DELHI 00000189  003.2 OF 006 
 
 
immediate impact of the recent avian influenza (AI) outbreak, their 
counterparts in the South are worried about the outbreak, too.  The 
rise in international commodity prices has raised the price of feed, 
pressuring margins for farmers.  The managing director of a South 
Indian poultry farm told us that southern farmers fear that the West 
Bengal AI outbreak may lead to a re-imposition of a recently lifted 
ban on Indian poultry imports into lucrative West Asian markets.  He 
said that consumption of poultry products in India is already 
slumping due to rising prices as farmers attempt to pass higher 
costs on to consumers.  The West Asian markets, he said, offer 
Indian producers better prices than local markets, adding that 
southern poultry farmers will have difficulties making ends meet if 
West Asian markets are blocked again. 
 
RELIANCE FINDS MORE GAS 
IN KRISHNA BASIN 
----------------- 
 
¶11. (U) Reliance Industries Limited (RIL) reported a new natural gas 
find in the Krishna basin, off the coast of Andhra Pradesh.  The 
find is in shallow waters, only 150 meters deep.  RIL's Operations 
Manager told Consulate Chennai that the company is still conducting 
a preliminary assessment of the reservoir.  He also said that he 
expects gas from the well to be tapped quickly and economically 
given the shallow depth of the find. 
 
TAMIL NADU IMPOSES "INFRASTRUCTURE CHARGES" 
ON DEVELOPMENT 
------------------ 
 
¶12.  (U) The Government of Tamil Nadu announced on January 11 the 
imposition of a one-time "infrastructure charge" of approximately 
USD 25 per square meter for new commercial structures.  Intended to 
raise funds for much-needed infrastructure improvements, the new fee 
may also dampen further the city's real estate market, which 
continues to experience a downturn that began in the second half of 
¶2007.  The managing director of one of Chennai's major real estate 
businesses told Consulate Chennai that he expected the new fee to do 
little to improve infrastructure, but would almost certainly 
contribute to an increased slowdown in the real estate market. 
Builders, developers, and other real estate businesses plan to 
protest the new fee, and will bring in figures from the education 
establishment to help out -- some 25 colleges in Tamil Nadu are 
awaiting approvals of new buildings and have received notice that 
they are expected to pay the new fee. 
 
CESSNA OPENS PILOT 
TRAINING CENTER 
---------------------- 
 
¶13.  (SBU) Cessna Aircraft Company, a Textron, Inc. company, has 
chosen its first Cessna Pilot Center in India - Touchwood 
Entertainment Limited's Aviation Academy based in the Raipur.  The 
Raipur pilot center is independently owned and will be the only 
authorized flight school in India to use Cessna's integrated 
computer-based instruction for teaching.  This pilot center will 
enable Indian students to complete their private pilot's certificate 
in about 54.5 hours, almost 30 percent less than the international 
average.  The Raipur Cessna Pilot Center will operate with new, 
fully insured Cessna 172 aircraft, which are currently under factory 
warranty. 
 
¶14.  (U) Touchwood Entertainment Limited operates on a five-acre 
facility in Raipur, the capital of Chhattisgarh State. The 
10-year-old company started aviation-related activities in 2004 by 
offering ground handling services for airlines and private air 
operators and began offering flight training in 2007.  The academy 
is centrally located and draws students from all regions in India 
and includes a staff of former Indian air force instructors training 
with an all-Cessna fleet. 
 
¶15.  (SBU) Aviation in India continues to experience rapid growth, 
 
NEW DELHI 00000189  004.2 OF 006 
 
 
creating both a shortage of pilots and extended demand for business 
aircraft.  Cessna's decision to appoint its pilot center in India 
comes at the right time to tap the opportunities offered by the 
exponential growth of aviation here and is yet another instance of 
an excellent partnership that benefits the people of India. 
 
BANGALORE'S NEW AIRPORT TO GET 
OWN AIR TAXI 
--------------- 
 
¶16. (U) Deccan Aviation announced plans on January 17 to establish a 
helicopter service from four points in Bangalore to the new airport, 
some 40 kilometers north of the city.  The shuttle service is slated 
to begin on March 30, the day that the new airport opens.  A 
"helihop" from Bangalore to the airport should take a mere 10-15 
minutes, in contrast to a grueling two -hour-plus ride by road.  One 
of the four departure points in Bangalore will be at Infosys's main 
campus.  An Infosys executive told Consulate Chennai that the 
company would use the service for its top executives.  He cautioned, 
however, that the shuttle operations would be restricted to daylight 
hours, which means that the shuttle would not connect easily with 
international flights, which depart late evening or early morning. 
According to other Bangalore-based sources, the original idea of the 
"helihop" service was mooted during a meeting last fall organized by 
the Bangalore Chamber of Commerce and Industry to discuss the city's 
increasing infrastructure problems. 
 
FISCAL RELIEF TO SUPPORT 
GROWING AVIATION INDUSTRY 
------------------------- 
 
¶17.  (U) Civil Aviation Minister Patel has urged Finance Minister 
Chidambaram to consider fiscal measures to bring relief to the 
country's airline industry in the upcoming budget.  During a meeting 
on January 15, Patel pressed for the following key issues - 
a) aviation turbine fuel (ATF) "declared goods" status so that it is 
sold at the same price across the country; 
b) waiver of service tax on air tickets for business and first-class 
on international flights; and 
c) tax benefits to encourage merger of private airlines under 
Section 72A of the Finance Act of 2007. 
 
¶18.  (U) Patel is also planning on meeting with state chief 
ministers to discuss rationalization of sales tax on ATF, airport 
expansion, and other infrastructure-related issues.  There are 80 
operational airports in the country, with another 20 greenfield 
projects under development.  In addition, there are at least 300 
airstrips lying unused in different states.  Patel is hoping to 
encourage the states to develop blueprints for support 
infrastructure and modern airports in line with the booming aviation 
industry.  States will also be asked to address related 
infrastructure issues, including for example city side development 
of the airport, providing services and connectivity, and linking up 
with tourism, and the hospitality industry for an all around 
comfortable experience at India's airports. 
 
WILL NOIDA GET A NEW AIRPORT? 
----------------------------- 
 
¶19.  (U) The proposal for setting up a second airport in India's 
capital, based in nearby Noida, is under deliberation by a Group of 
Ministers (GoM).  In early January, the Union Cabinet approved the 
Uttar Pradesh government's request "in principle" for an 
international airport (called the Taj International Aviation Hub or 
TIAH) in Greater Noida.  GoM must vet the legal aspects of the 
agreement with GMR, the group that is modernizing Indira Gandhi 
International (IGI) Airport in Delhi. 
 
¶20.  (U) Despite the Civil Aviation Ministry's advocating that Delhi 
needs more than one airport to meet the growing passenger traffic, 
GMR has strongly lobbied against building another airport in the 
nation's capital region.  GMR does have the first right of refusal 
 
NEW DELHI 00000189  005.2 OF 006 
 
 
for the Greater Noida airport and would be given a chance to match 
the highest bid if their quote is at least 10 percent less. 
 
¶21.  (U) Uttar Pradesh Chief Minister Mayawati has proposed to build 
the USD 895 million TIAH over 3,700 acres through a special purpose 
vehicle (SPV).  The SPV will be formed as a joint venture with a 
private part selected through a competitive bidding process.  The 
equity composition will be as follows - 74 percent private party, 13 
percent Uttar Pradesh state government through sponsor, and 13 
percent for other government agencies, like the Airport Authority of 
India.  Early plans for the Noida airport include two runways, with 
the exterior bordering a large commercial district. 
 
KINGFISHER EXPANDS ITS AIRCRAFT FLEET 
------------------------------------- 
 
¶22.  (U) Riding high on the heels of this week's figures by the 
Directorate General of Civil Aviation showing Kingfisher gaining 
market share and inching closer to Jet Airway's dominance, Vijay 
Mallya, Chairman and CEO of Kingfisher Airlines announced plans to 
buy five more Airbus A380s.  Back in 2005, Kingfisher placed an 
order for five A380s for long-haul operations.  Kingfisher has asked 
Airbus to advance delivery of the five confirmed A380s. Scheduled 
for 2011-12, the domestic carrier has asked the plane maker to have 
it ready by end-2009. 
 
¶23.  (U) At present, Kingfisher cannot fly overseas because 
it does not meet the domestic requirement of five years of 
experience on domestic routes.  However, with the merger of 
Kingfisher and Air Deccan, the airline is coming closer to launching 
its international service.  Earlier this week in Chennai, Executive 
Chairman Gopinath of Air Deccan announced plans to launch 
international flights from August, when the airline will complete 
five years in the Indian skies. 
 
FLY FINNAIR TO THE US 
--------------------- 
 
¶24.  (U) In the race to offer flights to the United States, Finnair 
is planning to launch a Mumbai-New York flight in April 2008.  The 
airline currently offers service from Mumbai, via Helsinki, to New 
York.  This new sector is estimated to take 17 hours and 10 minutes, 
making it the fastest flight after the non-stop flights which 
average about 16 hours and 15 minutes. Finnair Director (Indian 
subcontinent) Taina Tornstrom also noted the load factor from India 
was just about the Finnair global average load factor of almost 75 
percent (and about 80 percent on long-haul flights). 
 
AUDIT ON PESTICIDES SHOWS COCA-COLA CLEAN 
----------------------------------------- 
 
¶25.  (SBU) The results of a recently completed audit by The Energy 
Resources Institute (TERI) showed that there is no measurable 
pesticide content in the input water at the six Coca-Cola bottling 
plants across India that TERI evaluated, nor in the water discharged 
from those plants.  Sunita Narain of the Center for Science and 
Environment (CSE), the organization that raised concerns about 
pesticides in Coca-Cola to begin with, discounted the TERI study 
because it did not test the final product.  When Econoff spoke with 
two Coca-Cola representatives, they pointed out that TERI laid out 
hundreds of criteria for use in the thorough audit, which yielded a 
report of approximately 600 pages.  Coca-Cola also took pains to 
emphasize that while the audit was at their expense, the company did 
not choose TERI to perform the audit or communicate directly with 
them.  U.S.-based NGO the Meridian Institute made all the 
arrangements and acted as intermediary. 
 
¶26.  (SBU) Coca-Cola's representatives did acknowledge, however, 
that the TERI audit advised water-management practices that go 
beyond compliance with regulations.  In particular, TERI indicated 
that Coca-Cola should decrease or even halt production at times when 
there is little rainfall around their bottling plants.  Though 
 
NEW DELHI 00000189  006.2 OF 006 
 
 
Coca-Cola believes such a policy has never been applied before by 
any company anywhere in the world, they assured Econoff that 
Coca-Cola will implement TERI's suggestion. 
 
INDIA'S DEMAND FOR GOLD WANING 
------------------------------- 
 
¶27.  (U) India's demand for gold (including jewelry), which accounts 
for 30 percent of the world demand, has slowed down since late 
August due to a spurt in prices that reached a high of Rs 
11,700($292)/10gm this week. Due to price volatility and an increase 
in re-cycling of gold, most customers are shying away as they see a 
correction coming. For Indians, gold is considered a safe haven 
asset for investors hedging against inflation, a weak dollar and as 
an alternative (apart from oil) investment to currencies and bond 
markets. The World Gold Council predicts some recovery in demand 
once prices stabilize and the impact of higher rural incomes due to 
a good winter crop works through. Analysts opine that Gold 
Exchange-Traded Funds (ETF) (EFTs allows mutual funds to purchase 
physical gold and issue units to the buyers against the same) that 
use gold as the underlying asset and Gold-linked debentures will 
strengthen the existing fundamentals, thereby increasing gold's 
demand in the country as ETFs grow. 
 
¶28.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD