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Identifier
Created
Classification
Origin
08NEWDELHI2367
2008-09-04 00:59:00
CONFIDENTIAL//NOFORN
Embassy New Delhi
Cable title:  

AMBASSADOR MEETS WITH MONTEK SINGH AHLUWALIA

Tags:   EAGR  ECON  EDU  EINV  ENRG  ETRD  ETTC  IN  KNNP 
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VZCZCXRO4795
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FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3233
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE IMMEDIATE
RUCNNSG/NUCLEAR SUPPLIERS GROUP COLLECTIVE IMMEDIATE
RUEAIIA/CIA WASHDC IMMEDIATE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUEKJCS/JOINT STAFF WASHDC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUEKJCS/SECDEF WASHDC IMMEDIATE
RUEHUNV/USMISSION UNVIE VIENNA IMMEDIATE 1623
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 6851
						C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 002367 

SENSITIVE
SIPDIS

E.O. 12958: DECL: 09/03/2028
TAGS: EAGR ECON EDU EINV ENRG ETRD ETTC IN KNNP
PARM, PREL, TRGY, TSPL
SUBJECT: AMBASSADOR MEETS WITH MONTEK SINGH AHLUWALIA

C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 002367

SENSITIVE
SIPDIS

E.O. 12958: DECL: 09/03/2028
TAGS: EAGR ECON EDU EINV ENRG ETRD ETTC IN KNNP
PARM, PREL, TRGY, TSPL
SUBJECT: AMBASSADOR MEETS WITH MONTEK SINGH AHLUWALIA


1. (C) Summary. Ambassador met with Planning Commission
Deputy Chairman Montek Singh Ahluwalia on September 2 to
discuss upcoming high level bilateral meetings, including the
President-Prime Minister meeting on September 25 and the CEO
Forum scheduled for October 14. In addition, the Ambassador
provided an update to Ahluwalia on the August 22-23 Nuclear
Suppliers Group meeting in Vienna and his outlook for the
second meeting scheduled for September 4-5. End summary.

AMBASSADOR REVIEWS NSG DEVELOPMENTS
--------------


2. (C) First, Ambassador Mulford provided Ahluwalia an
update on events at the August 21-22 Nuclear Suppliers Group
(NSG) Plenary in Vienna. The Ambassador expressed
disappointment and shock at the positions that many of the
NSG members took. USG officials had engaged with the NSG
members in the lead-up to the Plenary and the members had
signaled that they were "supportive" but had "concerns." The
Ambassador then noted that NSG members submitted over 60
amendments in the Vienna meeting to the draft NSG exception
that the U.S. had submitted. Ambassador Mulford observed
that the surprising number of substantial amendments nearly
amounted to a question of good faith, with key NSG members'
non-proliferation advocates allowed the upper hand.


3. (C) The Ambassador described to Ahluwalia how the meeting
in Vienna had 400 people ) minus the Indian delegation that
had to remain outside ) with all the chairs facing forward
toward the Chairman's desk, in a configuration that
discouraged debate and enabled NSG members to offer tough

amendments semi-anonymously. Ambassador Mulford also
explained to Ahluwalia that in the briefing with the Indian
delegation ) primarily Foreign Secretary Meno and Special
Envoy Shyan Saran ) during a scheduled break in the NSG
Plenary, the Indian side solicited questions from the NSG
members. None were offered. US representative John Rood
also encouraged the participants to utilize the opportunity
to ask questions of the Indian delegation, but no one did.

Looking Forward
--------------


4. (C) The Ambassador then considered the next steps. He
noted that India and the US have negotiated a "clean" text,
but that he anticipates it will be an extremely hard sell in
the next NSG meeting in Vienna on September 4-5. Ambassador
Mulford assured Ahluwalia that the US goal was to try to keep
the text "sacrosanct," with NSG member concerns limited to
comments in the Chairman's Summary. The Ambassador
identified several text changes that he thought would be
unacceptable: the "multilateralization" of the Hyde Act, and
any language that demanded automatic sanctions in response to
further nuclear testing. Whether it would be possible to
avoid such language, Mulford didn't know.


5. (C) Secretary Rice had asked the Ambassador to stay in
Delhi during the September 4-5 Vienna Plenary to engage the
GoI if needed. Mulford noted that National Security Advisor
Narayanan had spoken with him that day and was not happy to
learn that the Ambassador would not be in Vienna to help move
the deal through. Mulford observed that one of the problems
with the NSG meetings was the representational mode )- that
NSG members had designated their non-proliferation advocates
as participants at the Plenary rather than senior political
representatives who could see the big picture at stake. The
big issue for the NSG was whether the international
nonproliferation system would be stronger with India on the
inside. The US delegation on September 4-5 would be led by
State Department Under Secretary for Political Affairs Bill
Burns, which added weight to the meeting.


6. (C) Ambassador Mulford apprised Ahluwalia of his
discussions with the "Group of Six" like-minded country
members of the NSG ) Austria, Ireland, New Zealand,
Netherlands, Norway and Switzerland ) as well as with Canada
and Japan. The Ambassador explained that they needed to
realize the importance of the NSG exception to India. The
Ambassador had pointed out to them that any country that
blocks the NSG waiver should understand that its relationship
with India would not be able to meet its maximum potential as
India was likely to start a blame game, should the NSG

NEW DELHI 00002367 002 OF 005


exception not go through. Ahluwalia agreed that political
pressure was needed to keep the focus on the big picture. To
that end, Ambassador Mulford pointed out, President Bush and
Secretary Rice were making calls to the leadership of these
countries; however, the non-proliferation issues were often
emotive for some countries. Some of the NSG representatives
in Vienna had never been to India and had an outdated view of
the country and the world today.


7. (C) Mulford pointed to the substantial reductions in
carbon-based emissions that would result from India,s access
to nuclear energy made possible by the civil nuclear
initiative. The Ambassador referenced an estimate that the
amount of coal substituted with nuclear energy in India over
the next twenty years was equivalent to half the amount of
emissions from the state of California and more than all of
the EU25 emission cuts combined (Note: according to a study
by David Victor published by the Council on Foreign
Relations, July 18, 2006. End note). Ahluwalia responded
that India,s lead nuclear scientist, Department of Atomic
Energy Chairman Dr. Anil Kakodkar, had projected that by 2050
India's access to uranium through the civil nuclear
cooperation initiative would treble the amount of uranium
India could process and use toward nuclear energy, going from
the equivalent of 200,000 MW of power to 600,000 MW of power.
But, Ahluwalia questioned, do the nonproliferation people
care? The Ambassador responded that they apparently did not,
since they went so far as to request that the statements in
the NSG waiver text referring to the energy benefits of the
deal be removed.


8. (C) Ahluwalia opined that keeping the language on energy
benefits in the text was useful, if not to the NSG members,
then to a larger audience that would consider the text. The
Ambassador concurred, noting that it was important to get the
text through the NSG quickly so that the bilateral deal could
move not just to Congress but also to President Bush for
needed presidential determinations. These determinations
were one-time requirements that did not need to be repeated
in a new administration.

UPCOMING PRESIDENT-PRIME MINISTER MEETING
--------------


9. (C) Ambassador Mulford moved to the topic of the
scheduled September 25 meeting between President Bush and
Prime Minister Singh in Washington. He asked Ahluwalia what
issues he thought the two leaders should discuss, noting that
the President was interested to know the latest on the
government's reform impulse that it indicated after winning
the confidence vote in Parliament in July. Ahluwalia started
with a longer-term observation: that the government's
decision to part ways with the Left was decided on the issue
of the Indo-US civil nuclear deal, but that the parting of
ways was done with the sense of it being a longer, durable
split. In the short-term, Ahluwalia continued, there is
still the question of whether any legislative reforms can be
done before elections. He thought the most that could be
done would be to introduce the insurance amendment
legislation that raises the cap on foreign direct investment
(FDI) from 26% to 49% and to pass the pending banking
amendment act that removes the limit on voting rights of
shareholders. Ahluwalia opined that introducing the
insurance legislation would be the government's signal of its
commitment to reform. He thought the banking amendment
should go through, but it mostly depends on whether the BJP
signals its support, because otherwise, the government is
unlikely to be able to amass enough of its new supporters to
vote for the bill.


10. (C) The Deputy Chairman also pointed to non-legislative
reforms as being very possible. He suggested that Commerce
Minister Kamal Nath could do more on investment (Note: The
Commerce Ministry has the lead on the government's FDI policy
that designates most FDI caps in the country not controlled
by existing legislation. End note.) Ahluwalia also looked
to the Banking Roadmap which is supposed to be revisited by
the government and the central bank, the RBI, in 2009. He
thought a new roadmap that opened India's banking sector to
more foreign participation would not be issued until after
national elections next year. He noted that the currently
scheduled October-November parliamentary session was not very

NEW DELHI 00002367 003 OF 005


long, and that after that, there was not likely to be a
substantive session until after elections. He opined that
since the deadline for a new Parliament to be in session was
May 2009, that elections would have to be held by March.
However, he noted, the election schedule would have to work
around key school exams during that part of the year.


11. (C) Returning to the scope of possible reforms,
Ahluwalia reiterated that the Finance Minister wants to get
the banking bill through and that on non-legislative side,
improving the investment environment through "debugging" the
"creaking machinery" of the bureaucracy would be an important
reform. The Ambassador supported the idea, noting that
several American companies , most recently Oshkosh and
Sikorsky, had been disqualified from bids just shortly before
the bids were to be opened, raising questions of
transparency. Ahluwalia admitted that he had not heard of
these companies' situation. Ambassador Mulford suggested the
issue could be an agenda item for the October 14 CEO Forum.
Addressing the issue of questionable disqualifications would
help improve the business investment image of India.
Ahluwalia agreed, stressing that transparency was very
important. However, he countered, he has seen instances
where foreign companies were properly disqualified on a
technicality that they knew of, yet failed to communicate
circumstances properly. Even so, the Ambassador said, it
would be a good idea not to have disqualifications occur just
1-2 days before the opening of bids.

EDUCATION FOCUS AT CEO FORUM
--------------


12. (SBU) The Ambassador next suggested that education
collaboration might be a good agenda focus at the CEO Forum,
to which Ahluwalia agreed emphatically. Ambassador Mulford
asked about the possibility of commercial and military
offsets being used for investments in India's education
sector. Ahluwalia expressed the view that commercial offsets
-- mostly generated from aviation purchases -- were a more
likely source of revenue for higher education investments,
because the Ministry of Defense is likely to use defense
procurement offsets with its captive, protected state
interests.


13. (SBU) Ahluwalia indicated that the Indian side is "keen"
to step up its educational dialogue with the United States
and may wish to have it included in the joint statement
between the President and the Prime Minister at their meeting
in late September. He went on to suggest that, at the
October 14 CEO Forum, the CEOs could "sanctify" a plan to
move forward on education collaboration. He explained that
he has been reaching out to Indian CEOs and to prominent
Indians in the US, asking for suggestions for cooperation
between Indian and American universities. He was trying to
get the Secretary of Higher Education to the CEO Forum to
help get acceptance and commitment to moving forward on some
kind of collaboration. Under Indian law, Ahluwalia asserted,
all kinds of foreign investment in education was possible
short of giving a foreign university degree. He wanted to
get the CEO Forum to "sanctify" support for enhanced
cooperation and to establish a formal framework. Ahluwalia
also noted that, in addition to support for the idea, he
wanted the private sector to help pick up the costs of
exchanging students or faculty between Indian and American
universities.


14. (SBU) The Ambassador asked for clarification that newly
established programs could be for-profit, but Ahluwalia
explained that for-profit universities are not currently
allowed in India, based on a Supreme Court decision. But, he
observed, several states were taking the lead in developing
new education efforts, such as the Indian School of Business
in Hyderabad or Haryana Chief Minister Hooda's plan to build
an education city north of Delhi. India's private
universities and schools get around the obligation to be
nonprofit institutions by establishing a trust or society
that contained hidden fees or very profitable hidden lease
and other costs passed from the nonprofit educational
subsidiary to a holding company's real estate subsidiary.


15. (SBU) Ahluwalia explained that he had proposed to Bill
Harrison, former CEO of JP Morgan and lead US CEO of the CEO

NEW DELHI 00002367 004 OF 005


Forum, that a subgroup be created to identify areas of
educational collaboration. He had proposed that Infosys
co-founder Nandan Nilekani be the Indian side lead, and had
asked Dan Price for suggestions on a lead from the US side.
Ahluwalia claimed that some collaborations are already
underway between US universities and the Indian Institutes of
Technology (IITs) and of Management (IIMs), India's premier
universities. In fact, Ahluwalia asserted, it would not be a
problem for US universities to identify an Indian university
partner, where each side would send students for a part of
the home program to study in the partner university and
recognize the credits of each other towards the home degree.


16. (SBU) Embassy Public Affairs Counselor Schwartz asked
whether Ahluwalia had ideas for specific deliverables that
could be announced at the CEO Forum or proposed actions for
the Education Working Group. Ahluwalia opined that there
might be a limited deliverable, such as announcing that
Nandan Nilekani and a US counterpart as co-chairs of a group
to provide a report to both governments after the Indian
elections. Schwartz asked whether a previously discussed
idea, the creation of a junior faculty development program,
perhaps funded by commercial offsets, could be kicked off at
the CEO Forum working group meeting. Ahluwalia thought that
was a good idea, adding that there was no doubt that a report
from the CEO Forum working group to pinpoint the use of
offsets would find a lot of takers and proposed that the idea
of offsets be cast as a note of suggestion, along with other
suggestions, for review by Nilekani's group. (Comment:
Ahluwalia's suggestion sidestepped Schwartz's proposal of
obtaining GOI government approval for the use of offsets by
simply incorporating it as an area of study for the newly
formed group. End comment.)


17. (SBU) Schwartz suggested that another deliverable might
be the establishment of a US - India Higher Education
Council, which ECA Assistant Secretary Goli Ameri had agreed
to fund during her recent trip to India. The Council would
be housed for simplicity at the Fulbright Commission which
has a bilateral Board of Directors and serve as a regular
consultative body for educators, along with their supporters
in government and industry. Ahluwalia thought that made "a
lot of sense," and suggested that in advance of the CEO Forum
meeting, it would be good to discuss the idea with MEA Joint
Secretary Gaitri Kumar and CII leader Tarun Das.

DE-CONSTRUCTING DOHA
--------------


18. (C) Ambassador Mulford lastly noted to Ahluwalia that
President Bush might wish to discuss with Prime Minister
Singh the recent failed mini-Ministerial in Geneva on the
Doha Round. Mulford asked Ahluwalia if he thought it worth
raising, to which Ahluwalia replied that anything that the
President felt should be raised would be fine and in fact the
two had often exchanged views on Doha before. Further,
Ahluwulia felt that if the US judged there was the
possibility of movement, then a discussion at the Bush-Singh
level would be especially useful. Ahluwalia noted that he
had not yet received a full briefing from the Indian
delegation, but that Joint Secretary Gopal Krisha was
scheduled to come over during the week to discuss with him.
However, Ahluwalia said that he had heard from the US
National Security Council's Dan Price on the August meeting.
Ahluwalia understood that the breaking point had been over
the special safeguard mechanism (SSM). The Indian view,
Ahluwalia believed, was that the 40% increase in imports as
the threshold trigger for raising tariff rates was too high.
As an economist, Ahluwalia opined, he didn't understand why
the percentage of imports had been used. More relevant, he
asserted, was the size of imports to the economy. The larger
the importance of imports to the economy, the more important
a small increase in imports was.


19. (C) Ahluwalia further offered that his limited
understanding from the Indian side was that U.S. Trade
Representative (USTR) Susan Schwab had hardened the US
position on SSM and would not consider a compromise proposal
that would have phased in an increase in the import increase
trigger. The Ambassador quickly countered that the US
perceived that India had hardened its stance on SSM after
Commerce Minister Nath had returned to Geneva from the July

NEW DELHI 00002367 005 OF 005


21 Confidence Vote in the Indian Parliament, and that the
change was unexpected. Ahluwalia replied indirectly, noting
that India's view of the SSM was that since the main proposal
for the Doha bound rates was so similar to the rates from the
Uruguay Round that the SSM only applied to Uruguay products
with no margins. The key question was what should be the
trigger for raising tariffs under the SSM? Economic
Counselor Davison explained that SSM was very important to US
agricultural interests. Many of them felt that without the
SSM, the US concessions on agriculture were too much. They
felt the overall package would not have resulted in increased
and predictable access to Indian markets.


20. (C) As the meeting drew to a close, Ahluwalia reiterated
that he agreed with the Ambassador that the President and
Prime Minister should discuss Doha at their meeting.
Ahluwalia thought there was maybe a communication issue that
could be addressed. The Indian government, he assured the
Ambassador, was not taking the view that there was nothing
there at Doha for India. If there are small points where
re-thinking and clarification could be made, and USTR Schwab
and Minister Nath were to meet again before the President-PM
meeting, then it would be useful to know what the US needs
are. If it is just this "SSM thing" of choosing between
either no SSM until 40% or creating a lower, graduating
trigger, Ahluwalia concluded, then it did not seem to be a
major difference.

MULFORD
MULFORD