Identifier
Created
Classification
Origin
07NEWDELHI4272
2007-09-18 12:16:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy New Delhi
Cable title:  

AMBASSADOR DISCUSSES CEO FORUM ISSUES WITH PLANNING

Tags:  EFIN EINV EPET ETRD SENV PREL PARM TSPL KNNP TRGY IN 
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O 181216Z SEP 07
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8314
INFO RUEHCG/AMCONSUL CHENNAI 1496
RUEHCI/AMCONSUL KOLKATA 0853
RUEHLH/AMCONSUL LAHORE 4124
RUEHBI/AMCONSUL MUMBAI 0588
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 NEW DELHI 004272 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEC DIRECTOR HUBBARD
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 P, SCA/INS AND EB/TRA JEFFREY HORWITZ AND TOM ENGLE

E.O. 12958: N/A

TAGS: EFIN EINV EPET ETRD SENV PREL PARM TSPL KNNP TRGY IN

SUBJECT: AMBASSADOR DISCUSSES CEO FORUM ISSUES WITH PLANNING
COMMISSION DEPUTY CHAIRMAN AHLUWALIA

NEW DELHI 00004272 001.2 OF 002


UNCLAS SECTION 01 OF 02 NEW DELHI 004272

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEC DIRECTOR HUBBARD
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 P, SCA/INS AND EB/TRA JEFFREY HORWITZ AND TOM ENGLE

E.O. 12958: N/A

TAGS: EFIN EINV EPET ETRD SENV PREL PARM TSPL KNNP TRGY IN

SUBJECT: AMBASSADOR DISCUSSES CEO FORUM ISSUES WITH PLANNING
COMMISSION DEPUTY CHAIRMAN AHLUWALIA

NEW DELHI 00004272 001.2 OF 002



1. (SBU) Summary: The Ambassador met September 14 with Planning
Commission Deputy Chairman Montek Ahluwalia to discuss the upcoming
CEO Forum, mid-October visit to India by Energy Deputy Secretary
Sell for the APP and Energy Dialogue, and the end of October visit
by Treasury Secretary Paulson and NEC Director Hubbard. Ambassador
also urged GOI resolution of the outstanding legacy issues of
McDermott and Dow Chemical. End Summary.


2. (SBU) The Ambassador noted that the CEO Forum was unique in that
it was one of the few private sector forums that attracted great
interest and attendance from senior government officials. It was
therefore important that the September 24 discussion focus on
critical issues including infrastructure financing and the impact of
inadequate IPR protection on foreign investment in India that has
lead to the recent decision by the Swiss pharmaceutical company,
Novartis, to pull out of India after its latest patent application
was denied. Ahluwalia agreed and said that he hoped the U.S.-India
civil nuclear agreement would not be on the agenda since the ball
was in India's court to move forward in a process well known to
everyone. Ambassador noted that, at some point, prospects for U.S.
private sector investment in India's civil nuclear industry would be
an appropriate discussion topic at the CEO Forum, but not until the

Agreement had been operationalized. Ahluwalia said that he would
discuss with Foreign Secretary Menon keeping the civil nuclear
agreement off the agenda, and Ambassador said that he would take it
up with Under Secretary Burns.


3. (SBU) The Ambassador said that it might be useful to repeat the
formula used in last year's successful CEO Forum by using the lunch
to follow up on important economic issues previously raised in the
morning meeting, and avoid topics like civil nuclear and the Doha
Round that will accomplish little in the short time available.
Ahluwalia agreed and said that CII and the Ministry of External
Affairs had been discussing with State and the NSC the idea of
moving from one large rectangular table to several round tables that
would group CEOs and government officials according to their
interest in particular issues/topics. Ahluwalia added that the GOI
intended to present a 14 point non-paper on progress made and
remaining/new issues that could be useful for discussion and follow
up after the meeting. Ahluwalia said that Hubbard in a recent phone
conversation said that the U.S. also intended to raise
agricultural/phyto-sanitary concerns.


4. (SBU) The Ambassador said that the October 29-30 visit of
Treasury Secretary Paulson to India presented a great opportunity to
focus on creating a climate of finance for infrastructure. He added
that Paulson and his team will bring great knowledge and experience
on financial market supervision, regulatory issues, securitization,
debt, and other key areas. Ahluwalia said that he will be joining
the Ambassador in the October 29 Infrastructure Conference in Mumbai
that Paulson and Indian Finance Minister Chidambaram will open.
Ahluwalia noted that it would be helpful if there was some movement
on U.S. approval of ICICI's and Bank of India's long-pending U.S.
bank branch applications. He added that there was a lot of
irritation in MOF over this issue, especially since Secretary
Paulson had told Chidambaram a year ago that there would be action.
Despite the lack of progress, Ahluwalia noted that MOF had recently
approved three new branches in India for Citibank. Ambassador
responded that the delay was not due to protectionism on the U.S.
part, but because of regulatory issues that required India's
establishment of an anti-money laundering/terrorist financing regime
(AML/CTF) that meets international standards. The Ambassador noted
that India had joined the Financial Action Task Force (FATF) as an
observer with the goal of full membership, which was a welcome step.
Ahluwalia asked for a one page note on outstanding issues related
to AML/CTF that he could discuss with Chidambaram before the CEO
Forum.


5. (SBU) The Ambassador said that Deputy Secretary of Energy Clay
Sells will visit India in mid-October for the Asia Partnership
Program (APP) summit and the U.S.-India Energy Dialogue. He added
that Secretary Rice is also considering coming out for the APP.


6. (SBU) Aluwalia asked what the key deadlines are for

NEW DELHI 00004272 002.2 OF 002


operationalizing the Civil Nuclear Agreement. The Ambassador said
that there can be no Congressional vote until India has reached
agreement first with the IAEA, then the NSG. Given the 90 day
Congressional review requirement before a vote is possible, India
would have to conclude the first two steps by December in order to
get a vote in Congress by the end of February. After that, getting
it on the Congressional calendar next year would be much more
difficult. Ambassador added that the U.S. has been very quiet
publicly on the Agreement since July in order to avoid "stirring
things up" for the GOI as it deals with political debate here.
Ahluwalia said that the issue in India is who will blink first,
Congress or the Left. For the Left, it is clear the issue is not
the 123 Agreement, but the deepening U.S.-India relationship which
they vehemently oppose. Ahluwalia said that there are two
possibilities if Congress calls the Left's bluff: it could continue
as a minority government until calling for elections, or the Left
could join with the BJP in bringing down the government, leading to
elections. In either case, Ahluwalia said the Government is
presently in a good political position to go into elections, but it
would be better to go to the polls on issues other than the 123
Agreement.


7. (SBU) Returning to the CEO Forum, the Ambassador said that
McDermott International CEO Nesbitt will be attending and there are
reports that the GOI may announce at the Forum that it is taking
steps to finally resolve this long outstanding legacy issue.
Ambassador cautioned that any action that fell short of
expeditiously settling in full the Supreme Court Judgment in favor
of McDermott, such as a partial payment through the bankruptcy
proceedings, will go down badly and create major ill feelings in the
U.S. business community. The Ambassador also cited the GOI's
continued third party claims against Dow Chemical in the ongoing
Bhopal land reclamation lawsuit as a further impediment by Dow and
others to invest in India, and he asked that the GOI drop its claims
against Dow. Ahluwalia took the Ambassador's points on McDermott,
noting the importance of finally putting the issue to rest. On Dow,
he said that the GOI does not understand Dow's concern about future
civil or criminal liability since the GOI third-party claims do not
suggest a GOI presumption that Dow is responsible for the cleanup.
The GOI's problem is that the NGOs are very active and vocal in this
case, and it is very difficult for the Government to now drop its
claims against Dow. The GOI was hoping for a quick resolution of
the case which would have settled the issue, but Dow prevented this
by asking for a stay in the proceedings. Ahluwalia noted that the
issue of whether a company like Dow can be held liable for the
actions of another company solely on the basis of acquiring that
company after the culpable activity occurred is an important and
novel legal issue in India that needs to be resolved. Ahluwalia
recommended that the Ambassador discuss the issue with Finance
Minister Chidambaram - a noted jurist.


8. (SBU) Ambassador again stressed the importance of the financial
sector in upcoming U.S.-India discussions, noting that a central
economic issue for India is the long-term status of its financial
markets. He added that India's financial markets today have the
makings for a regional financial center, given India's huge
hinterland and large and increasing savings rates that mirror the
conditions in the U.S. banking sector a generation ago. The
Ambassador said that virtually all large U.S. banks were once
domestic-centered, before they went global. Ahluwalia agreed,
noting that the GOI (with MOF and Prime Minister approval) had just
commissioned a High Level Committee on Financial Sector Reforms,
composed mostly of private sector individuals, to make
recommendations by next March on next steps in financial sector
reform. He added that, until India ends the dominance of the State
in the banking sector, there will never be a level playing field for
private or foreign banks that is necessary if India is to establish
itself as a regional financial center.


MULFORD