VZCZCXRO7946
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #1136/01 1161038
ZNR UUUUU ZZH
R 251038Z APR 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 1437
INFO RUEHCG/AMCONSUL CHENNAI 2812
RUEHCI/AMCONSUL KOLKATA 2111
RUEHLH/AMCONSUL LAHORE 4399
RUEHBI/AMCONSUL MUMBAI 1923
RUEHPW/AMCONSUL PESHAWAR 4839
RUEHIL/AMEMBASSY ISLAMABAD 4819
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 04 NEW DELHI 001136 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
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 
USDA PASS FAS/OCRA/RADLER/BEAN/CARVER/RIKER 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EINV EPET ETRD SENV IN
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
APRIL 21-25, 2008 
 
NEW DELHI 00001136  001.2 OF 004 
 
 
¶1.  (U) Below is a compilation of Economic highlights from Embassy 
New Delhi for the week of April 21-25, 2008, including the following 
items: 
-- INDIA SIGNS ON TO TAPI NATURAL GAS PIPELINE 
-- TREASURY U/S MCCORMICK DISCUSSES CLEAN TECHNOLOGY FUND 
   WITH POWER SECRETARY RAZDAN 
-- FDI HITS RECORD IN FEBRUARY 
-- GOVERNMENT MOVING ON FARMER DEBT WAIVERS 
-- GOI BLOCKS TATA BLACKBERRY SERVICE OVER SECURITY POLICY 
-- CHENNAI AIRPORT CLOCKS 59 PERCENT GROWTH 
-- BILLBOARDS COME DOWN ACROSS CHENNAI 
-- US AIRWAYS SEEKS CODE SHARE WITH INDIAN CARRIERS 
-- RAISING FDI CAP IN DEFENSE SECTOR 
 
INDIA SIGNS ON TO TAPI 
NATURAL GAS PIPELINE 
------------------ 
 
¶2.  (SBU) India's Ministry of Petroleum and Natural Gas (MPNG) 
Minister Murli Deora attended the April 23-24 Steering Committee 
meeting in Islamabad for the proposed 
Turkmenstan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline, 
at the invitation of the Asian Development Bank, Indian media 
reported.  On April 24, Minister Deora joined with petroleum 
ministers of the other three countries in signing a "Gas Pipeline 
Framework Agreement" which formally inducted India as a member for 
the proposed US$7.6 billion, 1,680-kilometer pipeline from 
Turkmenistan's Dauletabad natural gas field. 
 
¶3.  (U) On the long-standing issue of whether Dauletabad has 
adequate reserves, the Turkmenistan Government agreed to provide a 
third party certification of gas reserves within five months.  MPNG 
Secretary Srinivasan said that India and Pakistan would discuss with 
 
SIPDIS 
Turkmenistan the issue of pricing the natural gas at the next 
Steering Committee meeting to be held in New Delhi later in 2008. 
Secretary Srinivasan at a joint press conference of the ministers 
 
SIPDIS 
said that implementation would begin in 2010, with the first 
commercial flows of gas projected for 2015.  Press reports the 
1,420-millimeter-width (56-inch) pipeline would have projected 
capacity of 100 million standard cubic meters per day (mmscmd) or 
36.5 billion cubic meters a year (bcm/y), of which India's share 
might be 60 mmscmd or 21.9 bcm/y.  The pipeline route would be 
through Herat and Kandahar in Afghanistan and through Quetta and 
Multan in Pakistan terminating at Fazilka in Punjab, India. 
 
¶4.  (SBU) (COMMENT:  Lack of certification of recoverable commercial 
reserves from the Dauletabad field has been a stumbling block for 
the TAPI project and other such proposals for over five years.  GOI 
officials are enthusiastic about TAPI, but they remain concerned 
about security for the leg through Afghanistan and they expect tough 
negotiations on security and transit payment issues with Pakistan. 
In Indian Fiscal Year 2005-06, India produced 32.2 bcm of natural 
gas and imported an equivalent of 9.7 bcm of natural gas in the form 
of liquefied natural gas.  For the proposed Iran-Pakistan-India 
natural gas pipeline, Iran has offered India an initial volume of 11 
bcm/y.  END COMMENT). 
 
 
TREASURY U/S MCCORMICK DISCUSSES 
CLEAN TECHNOLOGY FUND WITH 
POWER SECRETARY RAZDAN 
---------------------- 
 
¶5.  (SBU) U.S. Department of Treasury Under Secretary for 
International Affairs, David McCormick met with Indian Ministry of 
Power Secretary Anil Razdan in New Delhi on April 24.  U/S McCormick 
briefed Razdan on the USG's proposed Clean Technology Fund, which 
aims at providing US$10 billion dollars -- of which the USA, Japan, 
and EU governments would contribute about $5 billion -- and he 
invited India to consider participating both as a recipient and as a 
donor.  The Fund would help developing countries fund purchase of 
 
NEW DELHI 00001136  002.2 OF 004 
 
 
advanced power-generation and other industrial technology, including 
renewable energy and energy efficiency technology, aimed at reducing 
growth in green house gas (GHG) emissions, while maintaining growth 
in energy-intensive sectors of the world economy. 
 
¶6.  (SBU) Secretary Razdan underscored that US$10 billion worldwide 
is a small sum compared to the estimated $500 billion India alone 
needs over the next 20 years to build the additional power 
generation infrastructure it needs.   India's per capita electricity 
consumption is at 660 kilowatt-hours (kwh) or 1/20th that of 
developed countries and its GHG emissions per capita are 1/20th that 
of the United States, while 500 million Indians have no access to 
electricity.  Thus, India must maintain sustained rapid growth in 
its consumption and production of electricity -- predominately 
through coal-fired thermal plants.  He said India's policy is based 
on four "E's" of energy, environment, equity, and efficiency. 
Razdan called for U.S. investment in India to set up power 
engineering capacity based on India's lower labor costs, adding that 
China was emerging as very competitive in global markets, including 
in India's market,  for power engineering equipment due to China's 
lower costs.  Razdan noted the need for carbon dioxide sequestration 
and storage technology that would be safe and effective, but 
expressed concern about how long it would be before such technology 
is commercially viable.  He underscored India's shortage of natural 
gas for its gas-fired thermal power generation capacity, and its 
problem of maintaining sufficient power output and frequency cycles 
at 50 Hz during the current peak temperature season to avoid power 
system transmission system damage.   India's problems with managing 
power supply and demand leave it vulnerable to political instability 
and social unrest, Razdan added. 
 
FDI HITS RECORD IN FEBRUARY 
---------------------------- 
 
¶7.  (U) Amidst continued financial market uncertainties and concerns 
over a slowdown in capital flows into India, the Commerce Ministry 
released the latest foreign direct investment (FDI) statistics, 
available for February 2008, showing record high FDI.  Fresh equity 
in February hit $5.6 billion, with an additional $2.4 billion in 
re-invested earnings bringing the total for the month to $8.34 
billion, a record high, and equivalent to 12 months' total FDI 
inflow just two years ago.  FDI for April-February (short just one 
month of the total fiscal year) also showed significant growth, up 
nearly 70% from the same time period a year ago to $20 billion from 
$11.9 billion.  Besides the tax haven of Mauritius, through which 
many countries channel their investment, Singapore emerged as the 
single largest investor with $1.7 billion from April to February. 
The UK and the US followed with $1.2 billion and $1.0 billion 
respectively. 
 
GOVERNMENT MOVING ON 
FARMER DEBT WAIVERS 
------------------- 
 
¶8.  (SBU) Ministry of Finance Joint Secretary (Banking) Amitabh 
Verma updated Econoff on April 24 on the government's efforts to 
implement the farmer debt waiver program, announced in the budget 
speech on February 29.  Verma confirmed press reports that the 
central government would spread payments over four budgets, 
including the FY2007-08, which just ended.  By July of this year, 
Verma explained, the government will have allocated Rs 100 billion 
($2.5 billion) from the FY07-08 budget and Rs 150 billion ($3.75 
billion) from the FY08-09 budget to a central fund to reimburse 
banks which forgive agricultural loans of small and marginal 
farmers.  Verma's office is currently working with the central bank, 
the RBI, and the government-owned National Bank for Agriculture and 
Rural Development (NABARD) to finalize implementing guidelines for 
the banks.  The guidelines will establish in detail which farmer 
loans are eligible and the process by which banks apply for 
reimbursement.  Verma's side discussion with his staff during his 
meeting with Econoff regarding language to include in the 
 
NEW DELHI 00001136  003.2 OF 004 
 
 
implementing guidelines suggested that the process is well along. 
Comment: Even if the guidelines are released next week, that leaves 
banks just two months to waive all eligible loans to as many as 40 
million farmers - a very tall order. Nonetheless, the Ministry of 
Finance appears to have moved quickly to implement the program and 
must still hope to reap the political benefits of such a massive 
undertaking.  End comment. 
 
GOI BLOCKS TATA BLACKBERRY 
SERVICE OVER SECURITY POLICY 
------------------- 
 
¶9.  (U) The GOI has asked Tata Teleservices not to offer BlackBerry 
services unless a monitoring system insisted upon by GOI security 
agencies is put in place.  A letter from the Department of 
Telecommunications (DOT) directed Tata not to provide BlackBerry 
services until the monitoring system is in place and a "master key 
and algorithm" are deposited.  Tata Teleservices sought permission 
from DOT for launching its offering, saying other leading telecom 
operators have been offering services without meeting security 
requirements.  DOT technical officials have held a series of 
meetings with BlackBerry manufacturer Research in Motion in order to 
find a solution so that service providers could continue offering 
premium BlackBerry services to an estimated 400,000 subscribers in 
India.  Press reports quote sources as indicating that RIM may place 
a server in India so that the e-mail routed through BlackBerry could 
be intercepted, if required, by the security agencies.  At present, 
servers used for routing content are located abroad. 
 
CHENNAI AIRPORT CLOCKS 
59 PERCENT GROWTH 
------------------- 
 
¶10.  (U) Chennai's airport experienced 59 percent passenger growth 
over the past year, Airport Director Dinesh Kumar told Consulate 
Chennai (and visiting Treasury Under Secretary David McCormick). 
The bulk of this growth, Kumar said, came from domestic travelers, 
and he expects both domestic and international growth to continue, 
to include the expected arrival of the super jumbo Airbus 380 by 
September on Singapore Airlines' Chennai-Singapore route.  He also 
said that the airport is in the midst of a major expansion, which 
will include a new terminal and second runway.  Even with this 
expansion, however, Kumar said he expects that the airport will 
reach the limits of its capacity by 2015.  He explained that 
aviation authorities are working on plans for a second airport for 
Chennai in the Sriperumbudur area, some 50 km west of the city, near 
the Chennai-Bangalore highway.  Obtaining an appropriate land parcel 
is difficult, he said, adding that the project would likely be a 
public-private partnership along the lines of the new airports in 
Hyderabad and Bangalore. 
 
BILLBOARDS COME DOWN 
ACROSS CHENNAI 
---------------- 
 
¶11.  (U) Chennai's enormous and ubiquitous billboards came tumbling 
down following an April 9 decision of the Indian Supreme Court that 
upheld a Chennai High Court ruling requiring the removal of 
unauthorized billboards.  (Judging by the number of billboards 
removed, practically all of the city's billboards were unauthorized, 
having been erected on public land or without the required permits.) 
 City authorities swung into action immediately, removing thousands 
of the billboards' vinyl covers from their steel frames literally 
overnight.  Work is now proceeding on demolishing the steel frames 
that held the billboards.  An official from the mayor's office told 
Consulate Chennai, however, that it was difficult finding enough 
acetylene torches to cut apart the giant frames.  Most of Chennai's 
residents seem to be enjoying the new views of the city and its many 
trees once hidden by the billboards.  Consulate Chennai now reports 
a lovely view of a park across the street, hitherto obscured by 
pictures of 40-foot women hawking silk fashions. 
 
NEW DELHI 00001136  004.2 OF 004 
 
 
 
US AIRWAYS SEEKS CODE SHARE 
WITH INDIAN CARRIERS 
---------------------- 
 
¶12.  (U) On April 22, Embassy officials met with US Airways Director 
of Alliances Dennis Tierney to discuss the carrier's expansion plans 
in India.  US Airways flies to 20 airports in Europe, primarily 
through Philadelphia, its gateway for European flights.  By summer 
2008, the airline hopes to have 25 virtual destinations in the 
Asia/Pacific region via code shares with Star Alliance members. 
Tierney is also hopeful they will sort out plans to offer non-stop 
service from Philadelphia to Beijing in March 2009.  On this visit, 
Tierney plans to meet with both Air India and Jet Airways to discuss 
US Airways proposals to partner with either or both Indian carriers 
to allow code share flights via Europe.  Tierney explained that 
while Air India has been invited to join Star Alliance as the 22nd 
member, this is not an exclusive contract and the alliance could 
invite other carriers to join later.  Moreover, US Airways is 
neither barred from entering into a code share agreement with Air 
India before it becomes an official Star Alliance member (likely to 
occur in 2009) nor restricted to pursue code share agreements with 
other non-alliance members (like Jet Airways).  He also noted that 
prior to Air India signing the agreement to join Star Alliance, the 
airline must have in place certain systems that parallel other 
alliance members like an established frequent flyer program, 
interline e-ticketing, ICAO safety audit certification, and 
integrated baggage check-in.  In the short term, US Airways has no 
plans to offer service to India but is actively pursuing code share 
agreements to offer direct service (via Europe) to India.  At 
present, they have a code share agreement with Lufthansa to offer 
direct service on flights from Delhi, Kolkatta, Bangalore and 
Chennai. 
 
RAISING FDI CAP IN 
DEFENSE SECTOR 
---------------- 
 
¶13.  (U) Defense Minister Antony notified Parliament on April 23 
about plans to raise the 26 percent cap on FDI in the defense sector 
to help facilitate co-development of multi-role transport aircraft 
by Hindustan Aeronautics as well as attract greater investment by 
defense and aerospace companies to India.  Industry observers have 
also indicated that FDI in defense could eventually be raised to 49 
percent.  In a sector which has been traditionally dominated by 
state-run companies, the GOI is also eager to encourage domestic 
private sector participation, especially at a time when the defense 
budget has increased by 12 percent in FY07-08 to USD 24 billion. 
Companies like the Tata Group and Larsen & Toubro are negotiating 
with global defense firms on developing manufacturing units in 
India.  Also, for example, in December 2007, Boeing and Hindustan 
Aeronautics announced plans to attract 1 billion in aerospace 
manufacturing work to India by 2017. 
 
¶14.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
WHITE