Nuclear India at 60

On August 14th and 15th, as Pakistan and India rang in their 60th birthdays and Asian markets began to tumble reacting to the credit woes originating in the United States, I was watching the local news in my hotel room in Jaipur, Rajasthan. My travels thus far, have taken me to New Delhi, Agra (Uttar Pradesh), Jaipur, and now Udaipur (cities in Rajasthan). Being in India during this time gave me the opportunity to observe the domestic debate over the nuclear deal.

For better or worse, Indian news has adopted the American model of filtering the day’s goings-on through political pundits and partisan figureheads that pepper the facts with spirited opinions. Troublingly, political opponents of the nuclear cooperative agreement, represented in large part by the Communist party, are against the deal because they fear India is conceding too much sovereignty by submitting to the U.S. enabling legislation, the Hyde Act. So proponents of the bill in India are trying their very best to ensure the public that no such concession is being made. This back-and-forth has produced some rather unsettling debates on TV talk shows and reassurances displayed on scrolling legends that read something like, “Prime Minister says India’s right to conduct nuclear tests preserved in agreement”. While this falls short of indicating that India intends to use the agreement for military purposes, it certainly betrays the lurking desire of India’s leadership to enhance its military prowess.

Demonstrating similar concerns, former U.N. weapons-inspector Hans-Blix characterized the nuclear deal as another step in the wrong direction and one that is informed by Cold-War tactics aimed at containing China. The Hindu reported that Blix also worries about the increased sale of Australian uranium as an additional destabilizing factor in the region.

The United Progressive Alliance, India’s ruling coalition of political parties, cites India’s ever-increasing energy needs as a central issue which the nuclear deal aims to address. The Communist-led opposition whose support is crucial to the deal’s survival, rejects this justification as contrived citing the high costs attendant with extracting nuclear energy. As reported by the New Statesman, the nuclear deal would satisfy 7% of India’s energy needs up from the 2% that nuclear fuel currently provides.

Does Energy Grow On Trees?: Jatropha Plant to Address India’s Fuel Needs

Today the WSJ reports that jatropha (pictured), a plant found throughout India, represents a major potential source of energy. The “ugly” shrub’s potential centers on the oil contained in its “golf-ball-size” fruit, which can be refined into biodiesel. Horticulturally-derived fuel, particularly from corn and sugarcane, is already an important source of alternative energy for many countries. Within the U.S., farm states like Iowa and Nebraska have experienced significant economic growth due to government incentives for ethanol production and Brazil has been particularly successful at reducing its oil imports by promoting the consumption of ethanol produced from sugarcane.

However, unlike corn and sugarcane, both of which are edible, jatropha has no value as a foodstuff. This means that jatropha used for biodiesel production will not make food more expensive or “divert resources away from crops that could be used to feed people”. The plant, which was formerly considered to be relatively useless beyond its ability to be grown as a hedge, keeping wild animals from entering farms, is also attractive due to its hardiness and ability to grow in difficult environments (“deserts, trash dumps, and rock piles”). It is also requires little water or fertilizer to thrive, both products which may be expensive or hard for poor farmers to come by. Other sources of biodiesel like corn and palm oil, require large amounts of water and land, jatropha is less picky.

The economics of jatropha biodiesel appear to be attracting the attention of some big players in the international energy industry. Some estimates place the per-barrel cost of refining jatropha at $43, half as much that of corn. With oil hovering at $70 per-barrel, this could make large-scale biodiesel production competitive without market-distorting government subsidies. BP recently invested $90 million in a joint venture with another British firm to develop jatropha biodiesel production in India as well as other countries.

Although some worry the flow of money into jatropha could suddenly dry up if the plant doesn’t live up to the hype and horticulturists caution that little is known about the plant due to its only new-found notoriety , some feel that jatropha oil could play a significant role in growing India’s biofuel capacity, something the Wire first profiled here.

IBM: India to Become Major Automotive Manufacturer by 2015

The ongoing malaise within the US automotive industry is well-known. Toyota recently overtook GM as the world’s largest car maker, DaimlerChrysler finally offloaded its struggling Chrysler division to a private equity group, and all the American manufacturers are saddled with “legacy costs”: generous health insurance and pension coverage for workers, concessions given at a time when they were selling record numbers of high-margin vehicles like SUV’s. With rising gas prices, demand for these sorts of vehicles has fallen and American automakers’ profits have followed suit.

Looking towards the future, concern has been raised that the growth of automobile manufacturing in countries like China and India could prove to be the proverbial “nail in the coffin” for US carmakers. However, to paraphrase Mark Twain, the NYT reports on a study by I.B.M. and the University of Michigan’s Transportation Research Institute suggesting that rumors of the death of the American automobile industry are indeed, greatly exaggerated.

In the study, IBM “interviewed 29 Indian automotive executives and experts from government, industry, and academia” on “wide range of issues, including India’s future market and industry structure, relationships between domestic auto companies and their foreign joint venture (JV) partners, as well as the challenges in the areas of infrastructure, air quality, and oil security.”

The study’s findings confirm that India has the potential to become a major vehicle-producing nation within the next decade but “suggest[s] that the Indian car market remains in a fairly primitive stage of development”. The study notes that before real growth in the automotive sector can be accomplished, the Indian government must address road and other transportation infrastructure deficiencies. As the NYT noted, “even if carmakers are able to increase production, many consumers do not want to buy them because roads are in poor shape and congested.”

Additionally, there already are signs that the Indian automotive industry is beginning to suffer from a shortage of skilled labor. This was apparently a surprise to many people outside India. The Transportation Research Institute’s Bruce M. Belzowski noted that “we were under the impression, as most Westerners are, that India is an almost unlimited source of labor.”

India’s domestic market aside, the study also noted that if Indian firms plan on exporting cars made in India (as the Wire has previously reported), they will have to address an additional range of problems. According to the report, “Indian automakers have difficulty understanding foreign consumers, developing a range of models, managing global supply chain logistics and incorporating advanced technology”. Again, on the infrastructure issue, “Indian ports would need significant upgrades to handle high volumes of vehicles”.

Although the study concluded that, given government involvement in addressing these problems, India should be able to live up to is potential as a “powerhouse on the world stage” of automakers, in the meantime US consumers should not plan on seeing Indian or Chinese-badged cars on their local roads.

“Mr. Condom” will Save Lives

The Wire has reported, on a few occasions about the very real threat that HIV/AIDS poses to India’s well being and security. From recalcitrant state officials who passionately resist sex education programs to the growing prevalence of infected Indian military personell, it is safe to say that glimmers of hope are seldom encountered in the landscape of an epidemic. Still, when they do shine through, it is our duty as hopeful citizens to magnify their intensity. Such is the case with this installment of the Wire that highlights the work of the National AIDS Control Organization (NACO), an agency organized under the auspecies of India’s Ministry of Health & Family Welfare.

Searching for a Hero

In a June 29th article, the Times of India reported that K. Sujatha Rao, NACO’s program cheif, had just returned from a trip to Thailand with a new sense of purpose; he wanted to dub India’s very own “Mr. Condom”. Modelled after a revolutionary Thai senator, Mechai Viravaidya, Rao envisions this individual to be passionate about the cause. Mr. Condom, whoever he may be, has a tall order to fill according to Rao:

He has to quiten cynics and inspire leaders into promoting condom use. He has to devise and implement imaginative condom promotion techniques as was done in Thailand. He has to have a dynamic personality to change both government policy and public perceptions about HIV, AIDS, sex and condoms.

According to the Times, the World Bank credited Mechai’s creative and sometimes iconoclastic methods for stymieing Thailand’s AIDS crisis and preventing another 7.7 million infections. His methods, to name a few, included persuading traffic cops, Santas and toll-booth operators to distribute condoms, Buddhist monks to bless batches of condom packs in ceremonies and hiring farmers to spray-paint condom ads on their cows.

“He glued condoms to visiting cards, put them on key chains and named his restaurant Cabbages and Condoms.”

Mr. Rao has assembled a strategic team to help devise methods of promoting condom use in India. Recruits from the prestigious Indian Institute of Management are among those who will lead the quest for “Mr. Condom”. Perhaps a “Ms. Condom” or a dynamic-duo of the two would enjoy even more success.

Buddhist TV and Hopes for Peace

Sri Lankan President Mahinda Rajapaksa inaugurated a new satellite tv channel The Buddhist, according to a June 30th report by the Hindustan Times. The channel is meant to celebrate the long-standing religious and cultural ties between Sri Lanka and India that date back to the third century B.C. when Prince Mahinda of India introduced Buddhism to the island. As the Times notes, this should be a welcome development for the Sinhalese Buddhists, who until now did not have a channel to call their own and should also bolster their support for President Rajapaksa. The Sri Lankan constitution charges the government with protecting the Buddhist tradition and The Buddhist will enhance its ability to do so. The channel will begin to broadcast in Sinhalese and English but plans to provide programming in Tamil, French and other international languages.

The Buddhist’s inauguration arises against the backdrop of a worsening armed conflict between the Sri Lankan-Sinhalese controlled government and the Tamil Tigers. After the two sides met in Oslo on June 25th, the Times reported that they agreed to return to the negotiating table although diplomats from Norway and the United States, among others involved in the mediation remain less than optimistic. Confronted with an aggressive Sri Lankan military that has caused more than 20,000 Tamilians to seek refuge in India and an unpredictable party chair of the Liberation Tigers of Tamil Eelam, Velupillai Prabhakaran, there is no indication that the negotiations will even take place, let alone the fruition of an accord.

The Buddhist stands to be an incredibly powerful new element in this ongoing struggle. On the one hand, if the government commandeers the station, thereby fortifying its dominance over the hearts and minds of Sri Lankans, the channel may prove to exacerbate the conflict and elevate its intensity by becoming a mouthpiece for inflammatory rhetoric. On the other hand, if the channel remains relatively independent from the Sri Lankan government and adopts an inclusive, critical and conciliatory philosophy, it will prove a powerful tool for the realization of a heretofore elusive peace. If a recent note submitted by the Centre for Policy Alternatives (CPA) to the International Press Freedom and Freedom of Expression Mission is any indication of what avatar of The Buddhist we can expect to see, then inflammatory rhetoric and suppression of free speech will prevail, at least in the beginning. According to this report, both the Sri Lankan government in the South and the LTTE in the East and North are brazenly infringing upon the freedom of press and human rights in general, leading to a “serious deterioration” in the security of media personnel. Abuses include abductions, murders and use of governmental agencies and the courts to silence, intimidate, and in some cases, shut down news gathering organizations.

Sec. State Rice Optimistic about Nuclear Deal, Receives Forbidden Mangoes

During yesterday’s US-India Business Council meeting in Washington, the focus was supposed to be on civilian nuclear cooperation. Ultimately, as the WSJ notes, “mangoes carried the day”.

US Secretary of State Condoleeza Rice (pictured) spoke to the assembled Indian and US businessmen and acknowledged that progress on the nuclear cooperation deal had been slow but noted that she was “certain that we will reach final agreement and be in a position to complete this deal by the end of the year.” As Kesav reported for the Wire before, the agreement has stalled recently due to a variety of concerns.

Following the speech, India’s media adviser Sanjaya Baru presented a basket of mangoes to Rice and declared:

“[mangoes are] “the best symbol of the diversity of Indian society and democracy. Nothing divides the Indian people more than our differences on which is the best variety of mango — we have 700 of them — but nothing unites the Indian people more than our firm belief that this is truly the king of fruits.”

Following on this, FedEx International president Michael Drucker, took credit for his company’s role in the presentation saying, “We’ve shown you today what FedEx can do. It can connect the world together by bringing mangoes to you”.

Long banned from the by US Department of Agriculture, Indian mangoes were only approved for import in late Ma as the Wire previously reported. There was no indication whether the mangoes presented to Rice were the Alphonso variety, highly prized by mango enthusiasts.

Picture by AP/Manuel Balce Ceneta

Starbucks Renews Effort to Enter India

Reuters reports today that Starbucks is revising a previously stalled application to enter the Indian coffee shop market. The news agency also cites the Business Standard in noting that the India’s Department of Industrial Policy and Promotion (DIPP) supports Starbucks’ entry into India’s “fast-expanding” economy through a “foreign direct investment route” since its previous (franchise) plan “did not conform to foreign investment norms”.

Reports on the details of the previous plan suggested that Starbucks’ Indian operations would be 51% owned by Indonesian Starbucks franchisee V.P. Sharma and the rest owned by Kishore Biyani, CEO of Future Group, a subsidiary of Pantaloon Retail. The DIPP was unwilling to approve this joint venture version of Starbucks’ plan because Sharma was a non-resident Indian.

In refiling its application, Starbucks is reportedly pursuing a franchise-based operation. According to Reuters:

“Foreign single-brand retailers can take 51 percent in a venture with a local Indian partner, while multiple-brand retailers are limited to cash-and-carry or franchise and license operations.”

Faced with rising material costs and lowered growth forecasts at home, Starbucks is keen to expand into both China and India.

Large Corporations Issue Report on How to Help Globalization’s “Losers”

The WSJ reported today that the Financial Services Forum (FSF), a non-profit/non-partisan group made up of CEOs of the world’s largest financial-services corporations, offered suggestions on what to do about workers “on the losing end of globalization”. Although similar concerns were raised by the OECD (and reported by the Wire here), the WSJ notes that the FSF report “marks one of the first times top business leaders have sought to weigh in collectively in the globalization debate”. Many of the companies represented within the FSF are worried that a public backlash against globalization could manifest itself in protectionist legislation and “the banking, investment and other CEOs who belong to the group have consistently cited protectionism as the leading threat to continued U.S. and global economic growth.”

The members of the FSF, including Lloyd Blankfein (CEO of Goldman Sachs) Stan O’Neal (CEO of Merrill Lynch), and Kenneth Lewis (CEO of Bank of America), noted in a statement that:

“Our open-trade and investment policies have significantly enhanced the economic well-being of American citizens, although not everyone has shared equally in the benefits of globalization.”

Along with this, the report offered the following positive statistics:

• Living standards in the US are $1 trillion higher per year because of globalization
  • This translates to a gain of $10,000 a year per US household
• If trade and investment is allowed to continue without restriction, annual US income could be $500 billion higher, with an additional gain of $5,000 a year per household

These developments were contrasted by evidence that:

• From the mid 1970s to late 1990s, the income growth of less-skilled workers in the US lagged behind “economy-wide productivity gains” as well as the income growth of “their more skilled counterparts”
• Since 2000 “the large majority of American workers have seen poor income growth”

In addressing these concerns, the report offered a wide range of policy suggestions. The WSJ noted:

“Its ideas range from the familiar — such as raising taxes on the wealthy to address income disparities — to the novel, such as insuring communities against “sudden economic dislocation” caused by a plant shutdown or other factors.”

Notable among these recommendations are the following:

• Merge all worker assistance (unemployment, wage insurance, and trade-adjustment assistance) into a single program
• Increase the progressivity of the overall tax system and ensure broader sharing of the benefits of America’s participation in the global economy
  • This would include elimination of the payroll tax for those earning less than the national average
• Policymakers should begin knitting individual free trade agreements into the basis for wider agreements
• Congress should significantly expand the resources available for enforcement of U.S. trade agreements
• Congress should limit the scope of inward investment reviews by the Committee on Foreign Investment in the United States.

Another area of importance touched upon is “one of the most frequently talked-about prescriptions for success in a global economy — improving workers’ skills through continued education.” Although the three economists who authored the report agree that education can have a role in reducing negative impacts of globalization in the future, greater training is deemed in adequate in its ability to address problems plaguing low-skilled Americans right now. Illustrating this, one of the authors, former Bush Administration economist and current Dartmouth College professor Matthew Slaughter, noted that “it has taken 60 years for the percentage of Americans with college degrees to grow to 30% from 6%.”

Apparently keen to see government consideration of its suggestions, the WSJ reports that the paper’s authors met with legislators this past Friday. However, the article cautions that “many of the paper’s recommendations are likely to be politically difficult to achieve.”

US Official Rips India for Failure of Trade Talks

As the Wire reported below, recent trade talks between the US, EU, India, and Brazil ended in failure as participants were unable to reach any comprehensive agreement. The dispute centered on the developing countries demands for reduced farm subsidies in the US and EU combined with the West’s insistence on greater access to domestic markets in India and Brazil.

In the wake of the Potsdam conference, senior negotiator and US Trade Representative Susan Schwab (pictured) indicated in an interview that she was “surprised” by India and Brazil’s “rigid negotiating positions”. Schwab felt that negotiators from these countries had been much more willing to compromise in previous negotiation sessions. Schwab speculated that the major reason behind this shift could be fears over trade deficits with China. Currently, India has a small trade surplus with China but there are concerns this may eventually become a deficit. In the interview she noted:

“There has been some backtracking [by developing countries] in the last two months because of concerns about China. Another factor is the sense that some of the more protectionist developing countries could hide behind the differences of others. It was only when the EU and the US made progress on agriculture that their positions were smoked out. They [Brazil and India] came to Potsdam with very rigid positions.”

Schwab also accused Brazil and India of selling out to other developing countries in order to find a common negotiation position, making it harder for their negotiators to be flexible when presented with offers by the US and EU:

“What you have seen is they spend huge amounts of time and political capital fighting it out internally and then they preclude their leaders [Brazil and India] from taking different positions – at Potsdam, Brazil and India were taking the same positions as they had almost two years ago.”

Although she expressed her disappointment regarding India and Brazil’s mutual inability to “provide leadership to the developing world” she was most critical of India, which many have accused of coming to the trade talks “expecting the negotiations to fail”. According to Schwab, India was able to get Brazil to choose “[developing country] solidarity over its economic interests”.

Photo of Susan Schwab from USTR

India’s Prized Right, at What Cost?

The U.S.-India civil nuclear partnership is in the throes of what one can characterize as labor pangs. The Hindu reported that officials from the two states are at an impasse regarding India’s right to reprocess spent nuclear fuel. The Hyde Act (discussed below), now being deliberated in Congress, is the enabling legislation for the nuclear partnership. In this bill, the U.S. would prefer to restrict India’s ability to reprocess spent uranium. A byproduct arising from this process is weapons-grade material. India argues that it has a right to reprocess fuel and has offered to place such a facility under “international safeguards”.  It further argues that the July 2005 joint-statement declaring the partnership contemplated such a right and that the U.S. now seeks to dilute it significantly. One way the Hyde Act attempts this is by requiring U.S. presidential certification for reprocessing a plant’s fuel. Not at all bashful, several high-level nuclear scientists in India have dug their heels in the ground and demonstrated a troubling fervor with which they’re willing to defend this right. One scientist quoted in the Hindu expressed his frustration with the Hyde Act and its implications:

“Here is another example that the U.S. remains bound by its terms and intends to invoke them to bludgeon India into agreeing [to the Act's terms]“.

Although India agreed to maintain a moratorium on weapons-testing, officials seem to want a stockpile of weapons-grade material as a safety net.

Pakistan Who?

In related news, the Guardian and several other news agencies reported that Pakistan is building a third plutonium reactor according to satellite images of Khushab, a town 100 miles south of Islamabad. Plutonium weapons pack a greater explosive charge than their uranium counterparts and are delivered in a relatively compact vessel. In a report authored by the Washington-based Institute of Science and International Security, David Albright, a former U.N. inspector, warned that this development should be viewed as an indication of Pakistan’s intent to accelerate its weapons proliferation and usher in a generation of enhanced nuclear strike capability. New Delhi shrugged off the report as another attempt by the partisan non-proliferation camp to stir up more controversey around the Indian nuclear partnership with Washington. A former director of India’s Institute of Defence Studies and Analysis (IDSA), K. Santhanam, was quoted in the Hindustan Times as saying,

“[The civil nuclear partnership] and suggestions of an arms race is a complete non-sequitur,–There is no connection with this and the Indo-US civil nuclear deal. This is part of the non-proliferation, ayatollah brigade jargon.”

 For its part, Pakistan maintains that it is pursuing this program for peaceful purposes according to an official who spoke to the Guardian on the condition of anonymity. In short, we can expect more of the same from both of these regional rivals who exhibited strikingly similar behavior while on the road to nuclear-weaponhood. Also present for this chapter is the United States and a flabbergasted Western world that can’t seem to squelch its hunger for money even when faced with the most perilious of circumstances. A word of advice to Washington- back away slowly or demand that all of India’s spent fuel, past and present must come under complete IAEA safeguards in order for the deal to go forward.