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DE RUEHNE #1608/01 2121211
ZNR UUUUU ZZH
O 311211Z JUL 09
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 7567
INFO RHEHAAA/WHITE HOUSE WASHDC IMMEDIATE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHGV/USMISSION GENEVA 8490
RUEHBJ/AMEMBASSY BEIJING 7862

UNCLAS SECTION 01 OF 03 NEW DELHI 001608 
 
SENSITIVE 
SIPDIS 
 
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 MDELANEY/CLILIENFELD/AADLER 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
USDA PASS FAS/OCRA/RADLER/BEAN/FERUS 
EEB/CIP FSAEED, KDUNNE, AGIBBS 
EEB/ESC 
US MISSION GENEVA FOR PALLGEIER/DSHARK 
EMBASSY BEIJING FOR ECON/FAS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EFIN EINV ENRG EPET ETRD BEXP KIPR IN CN
 
SUBJECT: New Delhi Weekly Econ Office Highlights for the Week of 
July 27-31, 2009 
 
REFTEL: New Delhi 1401 
 
¶1. (U) Below is a compilation of economic highlights from Embassy 
New Delhi for the week of July 27-31, 2009, including the 
following: 
 
-- Tax Breaks Clear the Way for Oil and Gas Auction 
-- Passing of FY 2010 Budget Trumps Economic Reforms 
-- India Plans September WTO Mini-Ministerial to Reenergize Doha 
Round Negotiations 
-- EU to Raise Concerns Regarding Wine and Spirits Duties on 
Sidelines of Delhi WTO Meeting 
-- China Threatens to Restrict Indian Food Imports 
 
Tax Breaks Clear the Way for Oil and Gas Auction 
--------------------------------------------- --- 
 
¶2. (U) The GOI is scheduled to re-launch one of India's largest oil 
and gas block auctions under the New Exploration Licensing Policy 
(NELP) VIII (meaning the eighth round) on August 8, with bids due by 
mid-October.  The Ministry of Petroleum and Natural Gas (MPNG) 
deferred the original NELP VIII auctions due to the ambiguity on 
natural gas tax exemptions and the resulting lack of investor 
interest.  However, MPNG rescheduled NELP VIII auctions after the 
Ministry of Finance announced that it would extend the seven-year 
income tax holiday on profits gained from producing and selling 
natural gas for blocks awarded under NELP VIII.  The MPNG also plans 
to auction ten coal-based methane (CBM) blocks under the fourth 
round of CBM auctions now that the Ministry of Finance has granted 
similar tax holidays for the exploration of CBM.  The GOI hopes 
these additional tax incentives will help attract $3 billion of 
investment in exploration under NELP VIII. 
 
¶3. (SBU) Malcom Lall, advisor to the MPNG's Directorate General of 
Hydrocarbons told EconSpecialist that the road show, the launch of 
the auction that will include conferences and meetings inviting key 
oil and gas companies, will begin in Mumbai and continue to Perth, 
Brisbane, London, Houston, and Calgary.  An international investor 
meeting in Singapore is also planned for August 17.  Mr. Lall said 
that 70 blocks are up for auction, out of which 24 are deep-sea 
blocks, 28 shallow water blocks, and 18 on-land blocks. 
 
Passing of FY 2010 Budget Trumps Economic Reforms 
--------------------------------------------- ---- 
 
¶4. (U) India's Parliament passed the FY2010 budget (12 months ending 
March 31, 2010) on July 27.  During the Parliamentary debate, 
Finance Minister Pranab Mukherjee introduced several additional 
concessions from the proposed budget. (Reftel) 
The budget changes include tax subsidies and tax holidays to home 
owners, and developers involved in lower and middle income housing. 
Two-year tax holidays were also extended on industrial parks and tax 
breaks were provided to the food sector including firms involved in 
processing, meat packaging, poultry, marine, and dairy products. 
Tax breaks have also been extended for the exploration of natural 
gas. 
 
¶5. (U) Comment: With one week remaining before the Parliamentary 
session ends on August 7, it is unlikely that the reform legislation 
benefitting foreign investors in the pension and insurance 
industries will be introduced.  The insurance bill was expected to 
lift the 26 percent foreign direct investment (FDI) cap to 49 
percent, and it was hoped a pension bill would align FDI limits in 
the pension sector (currently disallowed) with FDI limits in the 
insurance sector. End comment. 
 
India Plans September WTO Mini-Ministerial to Reenergize Doha Round 
 
NEW DELHI 00001608  002 OF 003 
 
 
Negotiations 
--------------------------------------------- ---- 
 
¶6. (U) India has invited trade ministers from the WTO developing 
country G-20 plus the United States, EU and other "large countries" 
to attend an informal mini-ministerial meeting in New Delhi on 
September 3-4 which, it is hoped, will "reenergize" Doha Round 
negotiations.  The agenda is still being developed.  At an event 
sponsored by the Federation of Indian Chambers of Commerce and 
Industry (FICCI) on July 29 (details to be reported septel), 
Minister of Commerce and Industry Anand Sharma said, "India is 
committed to taking the Doha Development Agenda (DDA) process to a 
successful conclusion."  He said the DDA process had "paused;" it 
needed to be "reenergized, but not reinvented."  He recognized that 
the economic downturn presented additional challenges for leaders, 
but stressed that "development" must remain at the core of the 
process and that DDA has to be fair and equitable.  Commerce 
Secretary Rahul Khullar said GOI's hope for the mini-ministerial was 
to have a "rallying of voices" among a larger group of countries 
than just the G-7 or G-8, creating a "rainbow coalition" of 
convergence.  Press asked which countries were coming and 
specifically whether the United States had committed.  Sharma 
responded that invitations had just gone out last week but that the 
GOI would share information on acceptances as they came in.  For 
logistical details on the mini-ministerial meeting provided by the 
Ministry of Commerce and Industry, see 
http://www.commerce.gov.in/wtoindia/default.a sp 
 
EU to Raise Concerns Regarding Wine and Spirits 
Duties on Sidelines of Delhi WTO Meeting 
------------------------------------------- 
 
¶7. (U) Continuing its efforts to decrease effective duties on 
imported wine, the European Union (EU) has announced that it will 
send its Trade Commissioner to India to meet with Minister Sharma on 
the sidelines of the September 2009 WTO Ministerial Meeting in 
Delhi.  (Note: Wine and spirits remain absent from the EU-India FTA 
negotiations on tariff reduction. End Note.)  U.S. exporters of wine 
and spirits have shared EU concerns over India's high import duties, 
which have consisted of countervailing duties equivalent to local 
excise taxes.  The basic tariff for both imported bottled wines and 
spirits into India is 150 percent, which is within the WTO bound 
rate.  However, a cascade of excise duties and other local state 
level taxes significantly increases the price of imported wine.  For 
example, the state of Maharashtra, which imposed a special fee of 
200 percent on imported wines until recently, has exempted 
locally-produced wines and spirits from excise duties. 
 
¶8. (U) Following separate WTO cases filed by the United States and 
EU in 2007, the Government of India (GOI) eliminated discriminatory 
additional custom duties on wine and spirits at the federal level; 
however, states remained authorized to charge special duties. 
 
¶9. (U) Comment: As wine and spirits will not be covered by the 
proposed uniform tax system (both at federal as well as state level) 
to be implemented in April 2010 as the Goods and Services Tax (GST), 
it is important that India resolves this long-standing issue with 
its major trading partners.  End Comment. 
 
China Threatens to Restrict Indian Food Imports 
--------------------------------------------- --- 
 
¶10. (U) In response to India's ban on Chinese milk and dairy 
products, India's largest trading partner threatened this week to 
restrict imports of Indian food products, including seafood and 
sesame oil.  State Commerce Minister Jyotiradiya Scindia informed 
Parliament that China's quality control supervision and inspection 
 
NEW DELHI 00001608  003 OF 003 
 
 
department (AQSIQ) had conveyed to him that it had encountered food 
safety problems in imported food products (seafood and sesame oil) 
from India.  Earlier this year, India imposed a partial ban on 
Chinese toy imports.  As China objected to India's discriminatory 
ban in June this year, the GOI extended the ban to all countries, 
and increased its scope to include Chinese dairy products on health 
safety grounds. 
 
¶11. (U) Comment: The GOI has claimed that the ban on milk products 
was purely a precautionary measure following reports of contaminated 
consignments from China to other Asian and African countries.  As 
trade between China and India has grown to $50 billion in 2008-09 
from $38 billion in the previous fiscal (making China India's 
biggest trade partner), the GOI will not be able to ignore China's 
protests for long. End Comment. 
 
¶12.  (U) Visit New Delhi's Classified Website: 
http://www.state.sgov/p/sa/newdelhi. 
 
ROEMER