CEQ'S CONNAUGHTON ENCOURAGES MAHARASHTRA GOVERNMENT,

UNCLAS SECTION 01 OF 03 MUMBAI 001602

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EFIN EINV PREL PGOV SENV SEXP EPET EMIN
ETRD, IN, CH
SUBJECT: CEQ'S CONNAUGHTON ENCOURAGES MAHARASHTRA GOVERNMENT,
BUSINESS LEADERS TO SUPPORT APP

REF: MUMBAI 1577


1. (SBU) In a series of meetings on August 24 in Mumbai, CEQ
Chairman James L. Connaughton encouraged Government of
Maharashtra (GOM) officials and Indian business leaders to
support the Asia-Pacific Partnership on Clean Development and
Climate (APP). He also briefed his interlocutors on the status
of the proposed U.S.-India civil nuclear agreement. (His Mumbai
meeting with the Department of Atomic Energy is reported
reftel.) Connaughton's GOM interlocutors told him that high
levels of sewage in Mumbai's water supply and air pollution in
the state's urban hinterland were Maharashtra's most pressing
environmental problems. Poor infrastructure compounded the
state's environmental problems. Connaughton also heard that the
state's demand for power far outstripped supply, that 31 percent
of power is currently lost to inefficiencies and theft, and that
demand was expected to rise rapidly over the next 5-6 years.
Connaughton encouraged the GOM to tap the APP and venture
capital initiatives to meet these concerns. Industrialist Ratan
Tata warned Connaughton that vested interests within the Indian
nuclear establishment, led by the Atomic Energy Commission,
could cause the civil nuclear deal to be implemented at an
"extremely slow pace." Tata said the USG should encourage the
GOI to open the civil nuclear sector to public/private
partnerships. In his meetings with local business groups,
Connaughton said $17 trillion would be invested in energy and
infrastructure projects throughout the world in the next three
decades. He emphasized that the APP would not work without
private sector participation and urged his interlocutors to stay
engaged in the APP process. End Summary.

Meeting with GOM Officials
--------------


2. (SBU) James L. Connaughton, Chairman of the White House's
Council on Environmental Quality (CEQ),met on August 24 in
Mumbai with Government of Maharashtra (GOM) officials, including
Chief Secretary DK Sankaran, Secretary for Energy Bhagwan Sahai,
and Principal Secretary for Environment Sharvari Gokhale.
Connaughton briefed his interlocutors on the status of the
Asia-Pacific Partnership on Clean Development and Climate (APP)
and the planned U.S.-India civil nuclear agreement. Connaughton
highlighted pollution management and energy development, issues
identified by his interlocutors as being of paramount importance
to the GOM.


3. (SBU) Gokhale told Connaughton that water pollution in Mumbai
and air pollution in landlocked urban areas were the state's
most pressing environmental problems. Poor infrastructure
hampered efforts to improve the situation, she said. The GOM
had successfully reduced the amount of industrial waste entering
Mumbai's water supply, but the city's 18 million residents
suffered from severe undersupply of potable water due to
inadequate sewage treatment and disposal systems, Connaughton
heard. Gokhale also noted that air pollution was a major
problem in some hinterland cities such as Pune and Solapur,
which lacked Mumbai's coastal wind patterns. Poor public
transportation infrastructure, lax regulation and outdated
technology hampered efforts to improve the situation, he said.


4. (SBU) Sahai told Connaughton that Maharashtra currently had
13,000 MW of power generation capacity, far short of the 20,000
MW of demand expected by 2012. Maharashtra could not sustain
its current 8 percent growth rate if generation capacity and
distribution networks were not expanded, Connaughton was told.
Chief Secretary Sankaran added that the state could grow far
faster in the coming years as the state planned to develop 50
business-friendly Special Economic Zones with high energy
requirements. Maharashtra already had a 12 percent power
deficit during peak hours, Connaughton was told. The shortage
would grow if supply was not expanded soon. Compounding this
problem, a full 31 percent of all electrical power generated in
Maharashtra was lost to inefficiencies and theft, Sankaran said.


5. (SBU) Mumbai did not face the power shortages common
elsewhere in the state because generation and distribution in
the city had been privatized over 70 years ago, Connaughton was
told. Mumbai is in the process of soliciting bids for new

MUMBAI 00001602 002 OF 003


private power, outside of the context of the GOI's "ultra-mega
power plant initiative. Despite the 4,500-5,000 MW short fall
that exists outside of Mumbai, political realities have
prevented replication of the city's successful privatization
model elsewhere in the state, Sankaran explained.


6. (SBU) Sahai said renewable energy was not fully exploited in
Maharashtra. Of the estimated 7,000 MW of potential renewable
energy, only 1,300 MW had been harnessed. Lucrative investment
opportunities existed in developing hydro-electric and solar
energy projects. Connaughton encouraged the GOM to tap the large
amount of venture capital already being spent on energy
initiatives. The Carlyle fund is raising a $1 billion fund for
energy and infrastructure, while Goldman Sachs is investing $3
billion. The challenge for Indian investors was to attract
venture capital to energy-related projects. Connaughton
explained that the APP's Buildings and Appliances Task Force
would be an excellent resource for the Government of
Maharashtra, as it explored solar energy and other materials and
design, which could be integrated into buildings.

Meeting with Chairman Tata
--------------


7. (SBU) In a separate meeting, Ratan Tata, Chairman of the
Tata Group and Indian Chair of the U.S.-India CEO Forum, warned
Connaughton that the Indian nuclear establishment, led by the
Atomic Energy Commission, would likely implement the proposed
bilateral civil nuclear agreement at an "extremely slow pace"
because of its vested interests and its less than enthusiastic
support for the deal. To encourage a robust implementation of
the deal, Tata said the GOI should be encouraged to open the
nuclear energy industry to public/private partnerships, and
asked for USG assistance in this regard.


8. (SBU) Tata also encouraged the U.S. to intensify bilateral
efforts to develop hydrogen fuel. Responding to Tata's request,
Connaughton said U/S of Energy David Garmon could act as India's
liaison for hydrogen fuel development. From the U.S.
perspective, Connaughton said, Indian hydrogen fuel initiatives
tended to wither away in the Ministry of Non-Conventional
Energy. The Indian private sector would need to counteract this
inertia if progress was to be made. Tata also said he hoped the
CEO Forum would focus more on advanced technologies, such as
nanotechnologies and materials, and not on "mundane" sectors,
where the Forum has made little progress to date. Connaughton
described a number of new technology initiatives under way in
the USA of which Tata was unaware and pleased to know were
taking place, such as cellulasic ethanol and clear diesels.

Engaging Mumbai's Influential Business Associations
-------------- --------------


9. (U) In meetings with the American Chamber of Commerce, the
Indo-American Chamber of Commerce (IACC) and the Confederation
of Indian Industry (CII) in Mumbai, Connaughton said that
investors planned to pump US $17 trillion into energy and
infrastructure projects around the world in the next several
decades. He emphasized that the APP would not work without
private sector participation and encouraged his interlocutors to
remain engaged in the APP process. Connaughton asked them to
weigh in with the GOI to remove countervailing tariffs on energy
efficiency and environmental products and services and to
further strengthen India's IPR regime, which was needed to
attract first-class clean environmental technology into the
country.


10. (U) Connaughton also addressed concerns raised by several
interlocutors regarding the Indian parliamentary debate on the
U.S.-India civil nuclear deal. He drew parallels between the
reactions of the legislatures in both countries, and asked
private industry to urge the Indian public not to overemphasize
the outstanding differences that existed in the various drafts
of the legislation in Congress. It was important to focus on
the broader framework of the deal. Ranga Iyer, Managing
Director of Wyeth, pointed out that the Indian Prime Minister
had secured a major victory by roping in the support of the Left

MUMBAI 00001602 003 OF 003


party which was previously opposed to the deal. Alok Gupta,
Western Region AmCham Chairman and Managing Director of Cabot
India, claimed that the opposition voiced by former leaders of
the Indian nuclear establishment reflected a mindset. The
establishment feared losing the leadership role and privileges
that it had enjoyed since the creation of the Indian nuclear
program.


11. (U) CEQ Chairman James Connaughton cleared this cable.
OWEN