Cablegate: New Delhi Weekly Econ Office Highlights for the Week Of

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R 261151Z OCT 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC 9003
INFO RUEHCG/AMCONSUL CHENNAI 1767
RUEHCI/AMCONSUL KOLKATA 1091
RUEHLH/AMCONSUL LAHORE 4181
RUEHBI/AMCONSUL MUMBAI 0853
RUEHPW/AMCONSUL PESHAWAR 4676
RUEHIL/AMEMBASSY ISLAMABAD 4086
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 03 NEW DELHI 004759

SIPDIS

SENSITIVE BUT UNCLASSIFIED
SIPDIS

USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD
DEPT OF ENERGY FOR A/S KHARBERT, TCUTLER, CZAMUDA, RLUHAR
DEPT PASS TO USTR DHARTWICK/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 TO DUS TERPSTRA, FAS/OCRA, RADLER

E.O. 12958: N/A

TAGS: EFIN ECON
SUBJECT: NEW DELHI WEEKLY ECON OFFICE HIGHLIGHTS FOR THE WEEK OF
OCTOBER 22-26, 2007

NEW DELHI 00004759 001.2 OF 003

1. (U) Below is a compilation of Economic highlights from Embassy
New Delhi for the week of October 22-26, 2007.

EXPANSION PROJECTS AT SOUTHERN
AIRPORTS SHOW PROFITS
-----------------------

2. (SBU) The expansion of runways, apron areas and terminals at
Chennai, Bangalore, Hyderabad, Coimbatore, Vizagapatnam, Kozhikode
and Trivandrum airports brought scaled-up operations and profits to
all seven of these South Indian airports in fiscal year 2006-2007,
the Regional Director of the Airports Authority of India (AAI) told
Consulate Chennai. He said that most of the profit came from
carriers servicing domestic routes. He added that the terminal
expansion at Coimbatore provided the needed infrastructure to handle
international operations, noting that the Singapore-based, low-cost
carrier Silk Air, carrier will begin operations there on October 28.
Not wanting to rest on the sector's laurels, he said that Chief
Ministers from several Indian states will meet in early December to
discuss problems faced by the civil aviation sector.

EX-IM OFFICIALS DISCUSS INFRASTRUCTURE
FINANCING OPPORTUNITIES
-----------------

3. (U) On October 17, Export-Import (EX-IM) Bank's Senior Vice
President John McAdams and General Counsel Howard Schweitzer met
with Dr. V. K. Garg, Chairman and Managing Director of the Power
Finance Corporation (PFC), to discuss potential for EX-IM to finance
the development of energy infrastructure.

4. (SBU) Asked about the Ultra-Mega Power Plants (UMPPs), Dr. Garg
explained that contracts have already been granted to Tata and
Reliance for two UMPPs and that proposals for a third are due on
October 24. He said there had been two or three foreign bidders for
each of the first two projects, and the process remains open to
foreign players. Garg added that the only criteria considered in
awarding contracts are the ability to successfully complete a
project on the scale of the UMPPs and the eventual tariff the
company intends to charge for electricity, though he assured McAdams
that companies could win contracts with a tariff that would still
yield a good profit. He said that 50 percent of the components for
the two UMPPs underway were imported and that there are only four or
five manufacturers of the critical technology used in these power
plants. For the first two, Tata and Reliance purchased equipment
from China, which Garg said had the same licenses and technology as
U.S. manufacturers but offered cheaper prices. The PFC is planning
to award contracts for two more UMPPs this year and another two in
the near future, with the possibility of yet another two down the
road. Mr. McAdams notified Garg that EX-IM is interested in
financing UMPPs, has a "couple billions dollars" in India now, with
no cap, has a AAA rating, and could offer a positive pricing
differential if companies use U.S. exporters with EX-IM. He also
said that EX-IM would encourage U.S. companies to respond to future
tenders.

5. (SBU) Turning to other opportunities, Dr. Garg suggested
investment in the development of windmills with horizontal blades
that could be placed on top of tall buildings. He said that India
is the world's fifth-largest harnesser of wind energy but that
capital costs are too high to make wind efficient right now. He
believes local manufacture of windmills is the key to solving this
problem. He also suggested that EX-IM look into the development of
one- to three-megawatt power plants that would serve very small
areas and operate on vegetable waste like sugarcane stalks and
coconut husks. He foresees such plants, which would reduce the
costs and inevitable power loss of long-distance transmission,
operating on a franchise model, with the PFC getting small amounts
of equity from franchisees, offering them training, and connecting
them with local experts, such as those at the National Thermal Power

NEW DELHI 00004759 002.2 OF 003

Corporation, so they could deal with any problems.

6. (SBU) Dr. Garg further expressed his excitement about the
prospect of satellite-based solar-energy stations and suggested that
EX-IM speak with the Space Island Group
(http://www.spaceislandgroup.com/solarsat.htm l), with whom he had
met earlier.

7. (U) McAdams and Schweitzer also met with the Ministry of Civil
Aviation and the Airports Authority of India to discuss EX-IM's
interest in financing aviation infrastructure.

USTDA - MAKING A DIFFERENCE IN
INDIA's ENERGY AND AVIATION SECTORS
-----------------------------------

8. (SBU) Henry Steingass, new Regional Director of the
(reorganized) South and Southeast Asia region of the United States
Trade and Development Agency (USTDA), visited Delhi last week to
participate in the Asia Pacific Partnership (APP) on Clean
Development and Climate Ministerial Meeting on October 15 and hold
bilateral meetings. Steingass discussed USTDA grants with key
project partners in the energy and aviation sectors. USTDA is
likely to provide the new Petroleum and Natural Gas Regulatory Board
technical assistance in developing regulatory procedures, methods,
and tools.

9. (SBU) After two years, the Petroleum Planning and Analysis Cell
(PPAC) has approved the draft request for proposal (RFP) for a grant
with USTDA valued at USD a USD 690,000 signed in June 2006 for PPAC
to undertake a National Gas Grid feasibility study with the Ministry
of Petroleum and Natural Gas. The study will help India meet its
energy security goals and focus on the following areas: physical
interconnections of pipelines and related capacity issues;
management and control of the gas grid as an integrating operating
system with a high degree of reliability; options for natural gas
storage; pipeline integrity and safety from both designs as well as
a operations perspective; and gas transportation tariffs and
practices, along with related technologies. Through implementation
of the study's recommendations, India will be better equipped to
meet its increasing energy demands since expanded access to and
utilization of natural gas is expected to facilitate economic growth
and maintain sufficient energy supplies as demand increases. The
recommendations will also help expand the gas market and possibly
open the doors for export of U.S. technologies and serices.

10. (SBU) USTDA is also working to finalize a USD 503,252 grant
with the Airport Authority of India (AAI) for a central navigation
systems/air traffic management (CNS/ATM) transition plan. The grant
will help upgrade India's CNS/ATM planning and associated systems at
India's growing airports. To date, the agreement is pending with
the Department of Economic Affairs in the Ministry of Finance for
final approval and is likely to be signed within the next few days.

U.S. IMAGE SULLIED BY REPORTS
AMERICAN COMPANY "DUMPED MUNICIPAL
WASTE" ON KERALA
-------------------

11. (SBU) Recent reports that "municipal waste" from the United
States had been "dumped" in the southern Indian state of Kerala
figured prominently in the Indian media. The controversy centered
on the contents of three shipping containers that arrived at Kochi
port in the first week of October. The importer told ConGen Chennai
that the containers were supposed to contain sixty-one tons of
"brown mix" (old corrugated cartons and other paper products) to be
recycled in India. Upon arrival, however, customs officials
reportedly discovered "substantial quantities" of plastics and
broken glass, used gloves, and rotten food in the containers. A

NEW DELHI 00004759 003.2 OF 003

Kochi Customs official told ConGen Chennai that the Kerala Pollution
Control Board confirmed the presence of these materials and asked
Customs to direct the consignment back to the port of origin.

12. (SBU) Predictably, Kerala's ruling Communist Party of India
(Marxist) used the opportunity to bash the United States. According
to media reports, Kerala Health Minister P.K. Sreemathy said, "We
must see this as an attempt to dump waste from the U.S. in India and
not merely as something concerning the Kochi Port or Kerala," and
that "the government views the matter with utmost seriousness,
especially against the backdrop of reports that waste, including
biomedical waste, was being dumped in Third World countries such as
India and of the outbreak of various epidemics in Kerala in recent
times." A popular Malayalam newspaper wrote on October 22: "In
these kinds of matters, one has to be very wary of the United
States. If it already engages in actions like these, what wouldn't
it do against India if we engage in the nuclear deal with that
country?"

13. (SBU) The Indian company that imported the containers expressed
dismay at the turn of events. "We are a small company; we are
totally broke. Our reputation is seriously damaged and we don't know
what actions the government is planning to take," the Executive
Director said. He noted that they had imported other types of
material from the American supplier in the past with no difficulty.
COMMENT: The Kochi incident appears to be an innocent sorting error
on the part of the U.S. supplier. But in Kerala's charged
anti-American political environment it provided a convenient
opportunity for the Left parties to beat up on American industry and
the U.S.-India civil nuclear agreement. Although the media storm
quickly died down, it underscores the degree to which an innocent
mistake on the part of an American business can impact Indian
impressions of the United States. END COMMENT.

14. (U) Visit New Delhi's Classified Website:
http://www.state.sgov/p/sa/newdelhi

Mulford

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