VZCZCXRO1533
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #2455/01 2561121
ZNR UUUUU ZZH
R 121121Z SEP 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 3363
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
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 03 NEW DELHI 002455 
 
SIPDIS 
SENSITIVE 
 
STATE FOR SCA/INS AND EEB 
USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD 
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR 
DEPT PASS TO USTR CLILIENFELD/AADLER/CHINCKLEY 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
USDA pass FAS/OCRA/Radler/Bean/Carver/Riker 
EEB/CIP DAS GROSS, FSAEED, MSELINGER 
DEPT PAS TO USTDA HSTEINGASS/JNAGY 
 
E.O. 12958: N/A 
TAGS: EAGR EAIR ECON ECPS EFIN EINV ENRG EPET ETRD BEXP
KIPR, KWMN, PHUM, SENV, IN 
 
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF 
SEPTEMBER 8 TO SEPTEMBER 12, 2008 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of September 8 to September 12, 2008, 
including the following: 
 
-- USTDA GRANT PROMOTES ENERGY SECURITY IN INDIA 
-- DOE DELEGATION FOLLOWS UP ON ENERGY DIALOGUE 
-- INDIA'S INFRASTRUCTURE SECTOR REGISTERS SLUGGISH GROWTH 
-- ARUN RAMANATHAN, NEW SECRETARY FOR DEPARTMENT OF ECONOMIC AFFAIRS 
 
-- NEW PENSION SCHEME FOR INFORMAL SECTOR WORKERS 
 
 
---------------------- 
USTDA GRANT PROMOTES ENERGY SECURITY IN INDIA 
---------------------- 
 
¶2. (U) Promoting energy security, new fuels technology, and energy 
efficiency in India is the goal of a $600,000 USTDA grant awarded 
today to Reliance Industries Limited (RIL) to partially fund a 
feasibility study for a coal-to-liquids project. The study will 
consider the application of advanced proprietary technology to 
co-process domestic Indian lignite coals with petroleum refinery 
residues produced at RIL's refinery at Jamnagar in the Western India 
state of Gujarat, in order to produce a variety of synthetic liquid 
fuels for the domestic market.  The grant was conferred on RIL by 
Deputy Chief of Mission Steven White at a September 12 ceremony. 
 
¶3. (U) Given the tremendous growth in demand for liquid fuels, 
coupled with increasing costs for imported crude oil and petroleum 
products, RIL has been focusing on commercially viable and 
innovative alternatives to supply energy needs in India.  This grant 
supports RIL's efforts to convert low-value refinery residues 
together with Indian lignite coals into synthetic fuels that are in 
high demand.  This grant also supports the objectives of the 
U.S.-India Energy Dialogue, which was launched in May 2005 to 
promote increased trade and investment in the energy sector by 
working with the public and private sectors to further identify 
areas of mutual cooperation. 
 
¶4. (U) RIL has selected Headwaters CTL of South Jordan, Utah, which 
owns the rights to the coal-to-liquids technology under 
consideration, to perform the USTDA-funded feasibility study.  In 
addition to the USTDA grant, Headwaters and RIL will contribute 
additional resources in support of the study's completion. 
 
¶5. (U) Successful completion of this study is expected to result in 
RIL establishing a minimum 20,000 barrels per day capacity plant 
with an estimated capital cost of $1-to-1.2 billion.  The U.S. 
export content for the project overall could be in the range of 
$150-170 million if the project is fully implemented.  In the 
future, the value of U.S. exports could increase substantially if 
RIL decides to add a second and third co-processing train, which 
would raise overall synfuel capacity to about 60,000 barrels per 
day. 
 
------------------ 
DOE DELEGATION FOLLOWS UP ON ENERGY DIALOGUE 
------------------ 
 
¶6. (SBU) U.S. Department of Energy (USDOE) Tom Cutler, Coordinator 
for the U.S.-India Energy Dialogue, and Raj Luhar (Senior Advisor, 
Fossil Energy) visited New Delhi September 9-11 to follow-up on 
progress on work plans from the Energy Dialogue's April 2008 
meetings and discussed continuity in the Dialogue with GOI ministry 
officials of the four Working Groups on Coal; Oil and Gas; Power and 
Energy Efficiency; and New Technology and Renewable Energy.  They 
met with the Ministry of External Affairs and drafted a joint 
statement energy item and fact sheet on bilateral energy relations 
for the upcoming POTUS meeting with Prime Minster Singh on September 
¶25. 
 
¶7. (SBU) Topics of discussion with GOI energy officials included: 
 
NEW DELHI 00002455  002 OF 003 
 
 
formation of a task force on integrated gas combined cycle (IGCC) 
technology; Gas Hydrates;    launching of the Coal Bed Methane Coal 
Mine Methane Clearinghouse in November; a draft MOU on second 
generation (non-food-source) bio-fuels between USDOE and the 
Ministry of New and Renewable Energy; cooperation on clear coal 
thermal power technology between India's National Thermal Power 
Corporation and the USDOE National Energy Technology Laboratory; 
proposed Oil and Gas Working Group events in early 2009 related to 
oil and gas exploration bidding, strategic petroleum reserves; coal 
mining, washing, and safety; and workshops on energy efficiency in 
appliances and buildings.  USDOE's Mark Ginsberg will visit in late 
September to advance projects in renewable energy and energy 
efficiency. 
 
---------------------- 
INDIA'S INFRASTRUCTURE SECTOR REGISTERS SLUGGISH GROWTH 
---------------------- 
 
¶8. (U) Following the trend of the last few months, India's 
infrastructure sector with a combined weight of 26.7 percent in the 
index of industrial production grew tepidly at 4.3 percent in July 
2008 compared to 7.2 percent in the same month of the previous year. 
 Domestic crude oil production was the worst performer with a 
negative growth of 3 percent in July 2008 versus an 8 percent 
increase last year, despite demand rising at 30 percent a year. 
(Note: The fall in oil output is mainly because of the aging oil 
fields run by the government-owned company, Oil and Natural Gas 
Corporation, which produces over 90 percent of domestic oil.)  Steel 
also performed poorly, registering a growth of 1.9 percent as 
compared to 10.8 percent in July 2007.  Electricity generation was 
sluggish during the month growing at 4.5 percent compared to 7.5 
last July.  The petroleum refinery sector was the best performing 
sector as it expanded by 11.8 percent as against 4.7 percent in July 
last year.  Cumulatively, during April-July 2008, infrastructure 
growth halved to 3.7 percent from 6.6 percent a year ago.  Analysts 
opine that the slowdown in demand for manufactured goods and in the 
real estate activity (due to the increasing cost of funds) along 
with supply side constraints for sectors such as power, cement, and 
crude oil could have been the reasons for this sluggish growth. 
 
--------------- 
ARUN RAMANATHAN, 
NEW SECRETARY FOR DEPARTMENT OF ECONOMIC AFFAIRS 
--------------- 
 
¶9. (U) Arun Ramanathan, the current Financial Services Secretary at 
the Ministry of Finance, has been given the additional charge of 
Secretary, Department of Economic Affairs (DEA) for a period of 
three months, ostensibly until a longer-term successor is named.  He 
replaces Dr. D. Subbarao, who has been appointed the new Governor of 
the Reserve Bank of India.  The other position that Dr. Subbarao 
held at the Ministry of Finance - that of Finance Secretary, the top 
bureaucrat and number two at the Ministry - remains unfilled. 
Ramanathan became the Financial Services Secretary in January this 
year.  Prior to becoming the Financial Services Secretary, he was 
Secretary at the Department of Chemicals and Petrochemicals, 
Ministry of Chemicals and Fertilizers since June 2007, overseeing 
the implementation of the Reddy Data Protection Committee Report and 
the issue of pharmaceutical pricing in India.  He holds a number of 
post graduate degrees including Development Economics from Cambridge 
University, Nuclear Physics from Andhra Pradesh University, and 
Business Management from Madras.  He is also an Associate of the 
Institute of Cost and Works Accountants of India.  Ramanathan is 
scheduled to retire in April 2009, just in time for elections and 
the new government to be in place. 
 
------------------ 
NEW PENSION SCHEME FOR INFORMAL SECTOR WORKERS 
------------------ 
 
¶10. (SBU) Meena Chaturvedi, Executive Director of the Pension Fund 
Regulatory and Development Authority (PRFDA) told Econoff on 
 
NEW DELHI 00002455  003 OF 003 
 
 
September 8 that Finance Minister Chidambaram has decided to move on 
additional pension sector reforms without waiting for passage of the 
pending PRFDA bill.  The Finance Minister announced late last month 
that the New Pension Scheme (NPS), which currently covers government 
employees hired after January 2004, will be extended to all "private 
citizens", including private sector companies, self-employed 
professionals, and informal sector workers.  The NPS architecture 
(consisting of a Central Recordkeeping Agency, the Fund Managers, 
the NPS Trust, the custodian and the Trustee Bank) is already in 
place.  The government earlier this year appointed three public 
sector companies, including the Life Insurance Corporation of India, 
the State Bank of India and UTI Asset Management Company Private 
Limited as funds managers. 
 
¶11. (SBU) Chaturvedi informed Econoff that the accumulated corpus 
amounting to about $350 million (Rs 15 billion) has been transferred 
to the fund managers for investment.  The individual registration 
and legacy data of the government employees would be transferred to 
the Central Recordkeeping Agency (CRA) by October 2008.  21 state 
governments have already issued notifications to join the NPS for 
their workers.  Chaturvedi noted that six state governments - Goa, 
Gujarat, Madhya Pradesh, Chhattisgarh, Karnataka, and Andhra Pradesh 
- are on the verge of signing contracts with the Central 
Recordkeeping Agency. 
 
¶12. (SBU) According to Chaturvedi, the PFRDA is aiming to have the 
system open for contributions from April 2009 onwards in Points of 
Presence (intermediaries) including banks and post offices.  About 
80 million subscribers are expected to join the NPS within the first 
few years.  The PFRDA is considering several options for scaling up 
the current system to accommodate more subscribers.  These include 
identifying more fund managers, including private fund managers. 
When asked about the possibility of foreign fund managers, 
Chaturvedi noted that the initial draft of the PFRDA bill had been 
silent on FDI, but that the Parliamentary Standing Committee on 
Finance had recommended that foreign entrance into the pension 
sector be commensurate with that in the insurance sector. 
Chaturvedi confirmed her understanding that if the insurance cap 
were to be raised from 26 to 49%, then the same amount of foreign 
equity would be allowed in pension fund managers. 
 
¶13. (SBU) Initially, the pension funds would have only two 
investment choices, either investing the entire contribution in 
government securities alone, or following investment rules 
applicable to non-government provident funds, invest up to 15 
percent of funds in a combination of equities and mutual funds. 
Chaturvedi explained, though, that the PFRDA is considering 
additional investment choices, including a default choice.  She 
noted that the government needs to provide financial literacy 
campaigns to help new investors, especially those in the informal 
sector who are likely to be less educated, about the risks and 
benefits of different investment options. 
 
¶14. (SBU) Regarding the pension bill in Parliament, Chaturvedi 
described a politically changed environment for trying to move the 
bill forward.  She noted that since the PFRDA bill is a "money bill" 
it requires a simple majority vote and failure to obtain that is 
seen as a failed vote of confidence - something, she implied, the 
government may be unwilling to risk. 
 
¶15. (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi 
 
MULFORD