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UNCLAS SECTION 01 OF 04 MUMBAI 000113 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL SENV ENRG TSPL ETRD IN
SUBJECT: CODEL PELOSI HEARS FROM INDIAN INDUSTRIALISTS THAT MARKET 
FORCES ARE DRIVING BUSINESS INTO CLEAN TECH 
 
MUMBAI 00000113  001.2 OF 004 
 
 
¶1.  (U) Summary:  In an open and wide-ranging discussion, 
India's leading businessmen told Speaker Pelosi and her 
delegation that they prefer market incentives rather than tax 
policy to promote environmentally-friendly technology.  They 
also stressed that, given high energy prices, large Indian 
companies were already shifting to energy-efficient technologies 
to save money, but smaller companies were in the need of 
assistance.  Furthermore, Speaker Pelosi and the panel agreed 
that India, given its rapid rate of growth and lack of legacy 
issues, was in a stronger position than developed countries to 
adopt green solutions.  The panel and the delegation also 
concluded that given the U.S. strength in creating innovative 
technology and India's strength in frugal engineering that the 
two were natural partners in making clean technology 
cost-effective.  However, Indian panelists cautioned that 
voluntary rather than mandatory action was preferred in regards 
to the adoption of such technology.  On the civil nuclear 
initiative, Indian industrialists thought that while the top 
layers of government are committed to it, in the near-term the 
survival of the federal government would take precedence.  In a 
separate meeting, the CODEL also heard about the Essar Group's 
plans to develop renewable energy solutions and minimize its 
carbon emissions. 
 
Incentives Rather than Carbon Tax Preferred by Indian Industry 
--------------------------------------------- --------------- 
¶2.  (U) On March 24, Nancy Pelosi, the Speaker of the House, and 
nine other members of Congress engaged with senior Indian 
business leaders in Mumbai to discuss clean energy and energy 
efficiency.  Speaker Pelosi initiated the discussion by stating 
that her delegation realizes that private sector participation 
was essential to stop global warming, and solicited the group's 
opinion on the levy of a carbon tax to check carbon dioxide 
emissions.  Mukesh Ambani, the Chairman & Managing Director of 
Reliance Industries, said that an incentive system rather than a 
carbon tax should drive clean energy and energy efficiency.  V. 
Raguraman, the Confederation of Indian Industries (CII) 
Principal Advisor on Energy, Water and the Environment, pointed 
out that energy prices in India are administered and not 
market-driven, and both industry and consumers pay heavily to 
subsidize the agricultural sector and the poorer sections of 
society.  A market-determined rational pricing system is 
essential for the energy chain before a carbon tax is necessary, 
he emphasized.  Ambani pointed out that the quality of life and 
income levels of many Indians had drastically improved over the 
past two to three decades which had created a power shortage 
throughout India.  He admitted that there was a great temptation 
to take the "easy" way out to solve this problem -- use the 
country's large coal reserves for thermal-based power plants, to 
use small cars with inefficient engines - but that he is 
confident that energy efficiency will become the way of life for 
Indians, provided the right incentives and the right market 
structure is in place.  Jamshyd Godrej, the Chairman of Godrej & 
Boyce and the moderator of the round-table discussion, concurred 
with Ambani, suggesting that low carbon emissions should be 
encouraged through market incentives rather than disincentives. 
Ashok Ganguly of the Government of India's Investment Commission 
added that the high energy prices paid by industry were forcing 
it to become more energy-efficient while it incrementally used 
more energy. 
¶3.  (U) Anand Mahindra, the Vice-Chairman and Managing Director 
of Mahindra and Mahindra, claimed that the consumer's demand for 
clean technology has forced industry to innovate and deliver 
energy efficient solutions or lose market share to competitors. 
He cited the production of the Mahindra diesel hybrid SUV - 
which he hopes to launch in the U. S. by 2010 -- as an example 
of green technology driven by consumer demand.   Green energy in 
India will be driven by the voluntary responsibility of the 
people and industry, he claimed.  Joint partnerships -- and not 
taxes -- are the solution, he continued.  Further explaining 
these points, Godrej mentioned that Indian industry is not 
opposed to India signing international agreements, as Indian 
industry knows how much it can already do to make itself 
environmentally friendly and make profits from these actions. 
On the contrary, Godrej explained that the Indian government 
will not do anything until it sees what other governments are 
willing to do. 
 
MUMBAI 00000113  002.2 OF 004 
 
 
¶4.  (U) Rep James Sensenbrenner recognized that global policies 
on climate change have to be sensitive to political realities. 
He pointed out that policies had to be geared at winning 
elections, as most of the major countries in the world, 
excepting China, are democracies.  He expressed agreement with 
Indian interlocutors that technology and market forces would 
solve the problem of global warming and climate change, and not 
carbon taxes and regulations.  He added that he believed that 
the private sector would be the driving force to effect changes 
and that entrepreneurs would be motivated if money could be 
saved and made from the use of green technology.  He emphasized 
that strong intellectual property protection was essential to 
encourage people to invest in innovation. 
 
India in a Desirable Position to Make Green Energy Choices 
--------------------------------------------- ------------- 
¶5.  (U) Ashok Ganguly, a member of the U.S.-India CEO forum and 
of the Prime Minister's Investment Commission, explained that 
energy consumption in India is highly skewed and most of the 
people have low to no energy consumption.  Therefore, he 
contended that it is unfair to control or limit energy 
consumption in India.  However, he believes that the low level 
of domestic energy consumption also gives India the ability to 
control, guide, and manage future uses of energy.  V Raghuraman 
also expressed the belief that India can "leapfrog" to the most 
advanced technology, as the country has no legacy issues. 
India's entrepreneurial talent, he claims, can develop "elegant 
solutions to build a low carbon economy."  Raghuraman who is 
also a director of Suzlon, the fifth largest wind turbine 
manufacturer, also lauded India's initiatives in wind energy. 
He noted that wind energy met the goals of the Tenth Five Year 
Plan (2002-07) of 6,000 MW in renewables in just three years 
time.  Most of the additional generation capacity of renewables 
-- targeted at 14,000 MW in the Eleventh Five Year Plan 
(2007-12) -- will again come from wind energy.  In contrast, he 
noted, India has an installed capacity of only 3 MW of solar 
power but there are expectations that this could increase to 
2,000 MW by 2010.   He affirmed that India needs to develop 
competitive and cost-efficient solar technologies, as most of 
India's villages do not have any electricity, so shifting to 
solar energy would be easy, he noted.  Raghuraman, however, 
warned that while India could become a market leader in the 
manufacture of renewables and clean technology, these 
technologies could be diverted to countries where there better 
incentives for their use, instead of being deployed locally. 
Speaker Pelosi pointed out that developing countries may be 
better placed to implement clean energy solutions due to an 
absence of legacy issues, rather than developed countries like 
the U.S.  Raguraman concurred that given India's current rate of 
GDP growth, by 2030 India's energy-inefficient legacy assets 
will constitute a miniscule portion of assets. 
 
U.S.-India Natural Partners in R&D for Clean Technology 
--------------------------------------------- ----------------- 
¶6.  (U) Ganguly said that one of the points raised in the 
U.S.-India CEO forum discussions was that both countries had two 
inherent strengths: the U. S. as an innovator of new technology 
and India as a laboratory to test and try out this technology to 
bring about change.  Mahindra pointed out that India's 
strength's in "frugal engineering" (achieving more with fewer 
resources) would aid this joint partnership.  Ambani highlighted 
India's technological prowess by citing India's success in the 
telecom sector which was plagued with inefficiencies and poor 
quality in the 1990's.  Now, he pointed out, calls cost less 
than 10 paisa (or cents) a minute.  India is the "playground" 
for the world economy and there are tremendous opportunities for 
partnerships to demonstrate technological efficacy, he 
continued.  Mahindra added that the U.S. gave the world the 
semiconductor, automobiles, the computer, and the Internet, and 
it should now take the lead in the innovations necessary to 
conquer the problem of climate change.  Speaker Pelosi 
emphasized that education was the key to innovation and 
recognized that the Indian-American community in the U. S. was a 
critical driving force behind innovation. 
¶7.  (U) Rep. Jay Inslee said that a globalized, largely 
de-carbonized economy was essential to achieve an 80 percent 
reduction of carbon emissions by 2050.  This, he admitted, is a 
 
MUMBAI 00000113  003.2 OF 004 
 
 
herculean effort and R&D investment has to be ramped up by 
several factors to achieve this.  He suggested that two issues 
be raised in the upcoming Copenhagen Climate Conference. 
Sector-based emission reductions and the creation of a clean 
technology fund where developed and developing countries 
contribute a certain percent for the development of clean 
technology.  Shashank Inamdar, the Managing Director of Praj 
Industries which is a major player in bio-fuels and 
ethanol-based technology, stated that the USG had allotted 
nearly USD 400 million for six research-projects for the 
commercialization of cellulose-based ethanol, and Praj was 
collaborator for some of the projects.  Rep. Rush Holt said that 
India is central to the issue of whether the world can deal with 
global warming and climate change.  He remarked that in other 
developing countries the R&D infrastructure is not in place, but 
in India it is.  He suggested that India's R&D infrastructure 
should be scaled up, with a concurrent major increase in 
investments.  There should be a major commitment for 
co-operation in R&D to provide the funds needed, he added.  In 
doing so, the thought of a billion people consuming like Western 
consumers would become feasible from the stand-point of the 
environment. 
 
Voluntary Rather than Mandatory Action Prescribed 
--------------------------------------------- ---- 
¶8.  (U) Rep. Anna Eshoo emphasized that efforts towards clean 
energy should be voluntary through "big-thinking" and 
"big-action."   She stated that the U. S. does not want to 
"preach or penalize."  She noted, however, that there is a sense 
of urgency and that the window of opportunity is limited and 
closing rapidly.  Mahindra appreciated Eshoo's comments and 
recognized the leadership role of the U.S.  He recommended that 
the move towards mandatory standards should be suggested by a 
neutral third country.  He stated that the "bargaining table 
approach" would not feasible for countries like India and China 
and suggested that the U.S. instead take a "leap of faith" and 
not adopt a "quid pro quo" approach towards India.  Ganguly also 
expressed confidence that Indian private industry and 
non-government bodies, cognizant of global warming and climate 
change, will work towards addressing these two challenges.  Rep. 
Inslee assured that by 2009, the U.S. hoped to have an 
aggressive carbon reduction strategy with a cap and trade system 
in place.  Markey added that the U.S. would then have some 
credibility in negotiation once the 2009 Bill is passed, but 
emphasized that a partnership with India would still be 
essential.  A partnership between the U.S. and India on clean 
technology and energy efficiency is needed to save the world, he 
concluded. 
¶9.  (U) Speaker Pelosi and Rep. Edward Markey both wondered 
whether there could be sector-based agreements for mandatory 
standards to reduce emissions and whether this reduction surplus 
could be traded in a new international market.  Godrej believed 
that mandatory standards work for sectors of the industry which 
view it as an efficiency and cost-reduction factor; he singled 
out the lighting and air conditioner industries in India who 
have used this approach.  He pointed out that the need for 
efficiency drives industry and this in turn drives innovation. 
But he emphasized that large industry has access to the large 
pools of capital to make the necessary investments but the 
challenge was to bring the thousands of smaller companies on 
board.  Praj's Inamdar explained that the "food versus fuel" 
debate compelled the company to explore the economic and 
commercial viability of bio-fuels as energy crops.  He suggested 
that the concessions given to farmers and oil companies for 
corn-based ethanol should also be extended to the producers of 
the ethanol blending technology.  These incentives are essential 
for long-term sustainability of the program for bio-fuels, he 
added.  Prem Jain, the Chairman of the Indian Green Business 
Council, said that the main focus of the CII-Sohrabji Godrej 
Green Business Center was to promote green buildings, as 40 
percent of energy is consumed by buildings.  He noted that the 
partnership with the U.S. to make India's first platinum-rated 
green building was based on technology transfers and not on 
financial assistance.   Green buildings can reduce energy 
consumption by 40 percent and water consumption by 30 percent, 
he continued. 
¶10.  (SBU) Drawing from an earlier meeting in her trip, Speaker 
 
MUMBAI 00000113  004.2 OF 004 
 
 
Pelosi said that the U.K. Prime Minister Gordon Brown had 
suggested revamping international financial institutions to have 
a window for clean technology.  Godrej pointed out that several 
studies had shown that the more banks pursue green business 
standards, the lesser their market share, similar to the way 
that environmental and other conditions on World Bank and IMF 
loans reduced their attractiveness to developing countries, 
pushing them to borrow from other sources with few strings.   He 
recommended that all private banks be required to make clean 
technology mandatory for project finance.  Speaker Pelosi 
assured him that Wall Street was cleaning up its act. 
 
Nuclear Energy: Will Remain a Small Part of India's Energy 
Portfolio 
--------------------------- 
¶11.  (U) In response to Rep. Jim McDermott query about CII's 
interests in getting the U. S. -India civil nuclear agreement 
passed, Raghuraman explained that CII meets regularly with the 
U.S. India Business Council (USIBC) to discuss how to drive the 
agreement forward, while also addressing political 
sensibilities.   Ganguly said that the top layers of government 
are committed to the deal.  However, he believes that it will 
not be the "end of the world" if the deal is not passed.  Godrej 
pointed out that nuclear energy currently accounts for around 
2-3 percent of India's total energy generation and will likely 
only grow to 5-6 percent.  While nuclear power is essential for 
the long-term and for a low-carbon economy, it is "not worth the 
government falling over this issue", he continued. 
 
Essar Group Discusses Its Clean Energy Plans 
-------------------------------------------- 
¶12. (U) After the roundtable discussion, CODEL Pelosi met with 
senior executives of the Essar Group, a major diversified 
company with investments in steel, shipping, telecommunications, 
and energy, including a recent foray into wind energy.   V. 
Krishnan the Head of Corporate Relations for Essar, discussed 
the company's plans to improve its refinery operations and to 
build 100-200 MW wind power generation plants in Tamil Nadu and 
Gujarat as well as a proposed project to create a 50MW solar 
energy facility in Rajasthan.  When questioned about the use of 
coal in their steel plants, Joshi emphasized that the company 
used natural gas and electricity instead of coal for its steel 
plants.  The company was planning to examine the combined carbon 
dioxide emitted from its business activities and look at ways to 
minimize these emissions.  It also planned a venture into the 
production of bio-diesel. 
¶13.  (U) In terms of expansion and funding of consumer 
technology, two years ago the Essar Group founded  the Essar 
Excellence Center, which employs over 1000 scientists and 
engineers in the metal, hydrocarbon, and energy sectors whose 
sole focus is to look at new technology and projects such as 
carbon credits. However, Sanjay Mehta, Essar Managing Director, 
told the Speaker that Essar does not have enough resources to do 
serious research in renewable energy at the moment, and relies 
largely on licensing these and other technologies from largely 
American companies. He added that it is not always easy to 
license key technologies, as some are proprietary products 
designed by industry competitors. 
¶14. (U) Comment: Members of CODEL Pelosi considered this 
roundtable to be one of the best interactions that they had in 
India.  While they were disappointed by the lackluster 
commitment to clean energy from the Government of India, the 
strong dedication by industry to develop alternative energy 
sources and clean technology impressed them.  In contrast to 
government concerns, the business leaders appeared open to 
adapting their businesses to incorporate clean technology. 
¶15. (U) The Delegation was not able to clear on this cable. 
OWEN