The Energy Crisis and Indian Development PDF

The Energy Crisis and Indian Development
Author(s): Paul F. Power

Source: Asian Survey, Vol. 15, No. 4 (Apr., 1975), pp. 328-345
Published by: University of California Press
Stable URL: https://www.jstor.org/stable/2643237
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THE ENERGY CRISIS AND
INDIAN DEVELOPMENT
Paul F. Power*
OTHER COUNTRIES MAY have experienced more severe dif-

ficulties resulting from the impact of the higher petroleum costs which
emerged in the world economy soon after the 1973 Arab-Israeli conflict. Yet
the vast human setting and the developmental stakes involved in the Indian
case make it notable among the impacted nations. Leading features of In-
dia's energy and related food problems are the estimated $900 million in-
crease in costs for imported oil for the 1974-75 fiscal years, significantly
higher costs for such other strategic imports as fertilizer, disappointing grain
production due to shortages and adverse weather, famine pockets and food
emergencies, shortfalls in energy supplies necessary for increasing industrial
production, heavy inflationary pressures, and the effective disordering of a
new Five Year Plan.
This essay focuses on the Indian government's responses to the multi-
faceted onslaught of the inflated energy costs and the international commu-
nity's reactions to India's predicament. Whenever possible provisional evalu-
ations are made of Indian responses and world reactions as to whether they
are likely to keep India from regressing in its developmental scale. It is as-
sumed that for India "development" consists of the maintenance and en-
hancement of an open society and an accountable regime, the achievement
of progressively higher levels of industrial and agricultural production and
per capita consumption of goods and services, and the realization of a mark-
edly more equitable distribution of wealth and political power. Although
Indian actors differ as to the means they prefer, these objectives are essen-
tially those endorsed by the Indian regime and supporting elites. Growth and
justice, Rajni Kothari has contended, must be simultaneous goals, not goals
that are in conflict.'
The following discussion also assumes in the manner of Kothari, many
Indian planners and the Congress government, that the only viable and self-
*Research for this paper was aided by the Taft Committee and the Research Coun-
cil of the University of Cincinnati. A report on the project was given at the South Asia
Conference held at the University of Wisconsin (Oshkosh), November 14-15, 1975.
'Rajni Kothari, Politics in India (Boston: Little Brown & Co., 1970), pp. 339-340.
328
PAUL F. POWER 329
respecting development is one which eliminates foreign aid. But, unlike

Kothari, the writer does not assume that self-respecting development requires
freedom from dependency on all strategic imports. Although the prospects
are mixed, India may reach a stage in which imported food is no longer
required; but like Japan, which has reached a high level of development,
India may depend in the long-run on imported oil and other vital products
as it has since independence.
Preexisting Variables and Emergence of the Crisis

India's critical energy and linked food problems have reflected and
acerbated conditions that have long troubled the Indian political and soc
systems: regime deficiencies in economic creativity, the bureaucracy's i
ficiency and excessive controls, improbity in and outside of the regime
tribution bottlenecks, a federal system that impedes central direction o
resource mobilization and uniform developmental or crisis management
forts, and labor and ethnic unrest. Intervening anti-developmental facto
operated in 1971-73 before the high energy crisis entered India.2 Among
them were the burden of attending to East Bengali refugees in 1971, the costs
of the brief Indo-Pakistani war, successive droughts, aid to Bangladesh, and
the extraordinary imports of food grains and fertilizers at higher prices.
Owing to multiple causes, the Fourth Five Year Plan (1969-74), which had
sought a 5.7% annual growth rate in national income, achieved only a 3.5%
growth rate. Price inflation in the last two years of the Fourth Plan was se-
vere. In late 1973 the wholesale price index was 26% above the level of the
previous year, an increase imposed on a 14% increase for the preceding
year. Prime Minister Gandhi had observed in August 1973 that the moment
was the worst since India became free, attributing India's difficulties chiefly
to the economic impact of the 1971 crisis, her political opponents and world
inflation.3
The politician's talent for selecting options best suited to divert criticism
from governmental performance and to please important opinion segments
is noticeable in the Draft Fifth Five Year Plan. Although the Plan concedes
difficulties and sets forth corrective measures, it is not replete with the polit-
ical economist's choice of what seems possible, given a certain record and
available resources. Instead, the Plan-prepared under the direction of D. P.
Dhar, who was then the Planning Minister and an advisor to Mrs. Gandhi-
underestimates the need for external financing and sets overly ambitious
levels of expenditure and production goals, symbolized by a projected annual
growth rate of 5.5 %.4 While not ignored, the national and international dan-
2Ramashray Roy, "India: 1973 A Year of Discontent," Asian Survey, XIV (Febru-
ary 1974), pp. 115-125. Analysis of India's food and inflation problems in 1970-73 is
offered in B. B. Bhattacharya, "A New Strategy," Seminar, No. 172 (December 1973),
pp. 19-21.
'Interview of Khushwant Singh with the Prime Minister, Illustrated Weekly of
India, XCIV, August 19, 1973.
'Government of India, Draft Five Year Plan: 1975-79, 2 vols. (New Delhi: Planning
Commission, 1974). Data on the performance of the last two years of the Fourth Plan
may be found in Economic Survey, 1972-73 and 1973-74 (New Delhi: Government of
India, 1973, 1974).
330 INDIA, ENERGY AND DEVELOPMENT
ger signs of 1971-73 are not significantly recognized in the draft document.
It was criticized by B. S. Minhas, an economist and member of the Planning
Commission who resigned in late 1973 because of his objections, inter alia,
to savings estimates and domestic oil production targets which he judged
excessive. Although supported by some press opinion, Minhas' criticisms
had no measurable effect and in December 1973 the National Development
Council and the Parliament approved the Draft Fifth Plan almost at the same
time as the oil price increase penetrated the subcontinent.
The signal event was the price action by Iran, India's customary source
for approximately 65% of the 70% of crude oil which India imports. In
mid-December Iran auctioned its oil to panicky buyers from industrialized
nations for $16 a barrel. A non-participant in the Arab producers' oil em-
bargo, Iran had led other OPEC members to capitalize on the international
political situation and the relatively inelastic demand for oil. In what must
rank as one of the more callous events in international commerce, the OPEC
increases were made universally without regard to the relative wealth or
poverty of consumers. Iran's auction confronted India with the prospect of
having to pay considerably more for oil imports than the previous price of
$4 a barrel.
The Indian government made no public protest at the time or later about
the Iranian action. Indeed, in the United Nations and other forums Foreign
Minister Swaran Singh indicated that India accepted as valid the OPEC's
argument that price increases were justified because of the inflated prices of
western goods in world trade, the previously low price of petroleum pro-
duced in the Third World, and the exhaustible nature of the resource. India
endorsed revalorization of all raw materials from the LDCs. India's reaction
may be traced to conviction and in the specific Iranian case to political con-
siderations in the Indo-Iranian relationship-Iran's Islamic and CENTO
links with India's adversary Pakistan, major sales of American arms to Iran
and the possibility of these weapons passing through to Pakistan. Iran had
been troubled by Indian criticisms of military alliances and had viewed
India as a potential threat to Pakistan's security following its 1971 defeat.
Prior to the oil increase India and Iran had reassured one another about
these concerns.
Although the balance of forces disadvantaged India, New Delhi re-
sponded to Iran's price action by seeking new oil contracts, credits and other
links. Time constraints, established oil supply patterns and the prospects for
tradeoffs prevented India from seeking major, alternative sources of supply.
An Indo-Iranian pact announced in February 1974 set a crude price of $8.50
a barrel, arranged for a liberal, $500 million credit to India to purchase part
of its oil imports and guaranteed a supply for a Madras refinery which is to
be expanded with Iranian assistance.
India will pay for some of the oil with shipments of iron ore and alu-
mina from the expanded production which Iran is to help finance. Also, Iran
has agreed to finance $500 million worth of imports from India, notably
cement and sugar. The two states are to establish a joint shipping company.
PAUL F. POWER 331
India will increase Indian technical personnel aiding industrial projects in

Iran which will sell petrochemicals and machinery to India. Announced dur-
ing Prime Minister Gandhi's visit to Teheran in April 1974 and explicated
during the Shah's visit to New Delhi in October at the end of his exhuberant
Asian tour, the complex and not fully implemented pact between the two
countries does not answer to anything more than a tentative evaluation. That
Iran was forthcoming and there are mutual, economic benefits is clear. So,
too, is India's retreat from objections to Iran's growing military presence in
the Persian Gulf and Indian Ocean. Politically, the Indo-Iranian agreement
has increased Iran's influence in Indian foreign policy and in the region gen-
erally, an influence that is apt to persist until India reduces its dependency
on Iranian oil through increased domestic supplies of fossil fuels or in-
creased diversification of external oil suppliers.
Parallel to the Iranian discussions, India negotiated a pact with Iraq, a
collegial and traditional crude oil supplier which Mrs. Gandhi visited last
January, for the sale of 2 million tons of crude oil at prices below the world
market. Half of the volume is to be financed by a $110 million concessional
credit. A 1973 oil pact with Saudi Arabia, a minor supplier, proved expensive
in 1974 conditions, impelling India to reduce purchases and seek Saudi
credits. In February 1975, Sheik Ahmed Zaki Yamani hinted at credits and
joint projects. Earlier India innovated in a pact with Libya that provides for
the sale of Libyan crude in 1975, Indian training of Libyan oil technicians
and oil exploration concessions and production sharing for India. In Janu-
ary 1975, India and the United Arab Emirates signed an oil, credit and tech-
nical aid pact. In conj unction with the Iranian deal, these Indo-Arab pacts
assured flow of crude oil for fiscal year 1974-75, ending March 31, 1975, of 13
million tons. Imports for 1973-74 were 17.5 million tons. Although increased
domestic production may help, the gap means a reduction in India's con-
sumption with adverse consequences for the society. Also, one may note that
there is a developmental gap owing to the absence of additional oil projected
by the 8% annual increase in Indian imports of oil in recent years.
India's oil diplomacy dominated the Gandhi regime's efforts to deal
with the energy question in the winter of 1974. Comparable to regime reac-
tions to previous economic crises, the Congress government did not reveal
heightened concern until last summer. Concretely, the regime did not delay or
immediately overhaul the Draft Fifth Five Year Plan, which was permitted
to go into effect April 1, 1974. To have taken either course, the government
believed, would have deflated the resolve and momentum generated behind
the Draft Plan. There would have been political fall-out as well. The policy
issue was acute, for the government had known at least as early as mid-Feb-
ruary 1974 that the World Bank judged that the world economic situation
and India's own conditions would require the generation and transfer of
resources well above the projections of the Fifth Plan. A confidential World
Bank study predicted that to meet the Fifth Plan India would require $12
billion in external aid over the Plan period in contrast to the $5 billion which
the Plan estimated.5 Stressing India's limited foreign exchange

estimated that two million tons of food grains would have to be
each of the next five years instead of minor or no imports anti
Plan. But the government would not discuss the leaked study i
Sabha and began to respond to challenges that required the rec
Plan.
Domestic Self-Help Efforts
India's recent difficulties have given new significance to national poli-

cies, legislation and programs dealing with the supply, pricing, allocation
and distribution of petroleum products; the domestic production and im-
porting of fertilizer; the production, storage, pricing and flow of food
grains; the search for additional domestic oil fields; the expansion and mod-
ernization of India's coal industry; and the enlargement and improvement
of the country's power industry. Signaling concern, the New Delhi govern-
ment called in February 1974 for a national effort to curb inflation, increase
production and eliminate waste. Steps taken by the central regime included
a 25% reduction across the board in the allocation of kerosene and diesel
and furnace oil to the states. This move was less difficult politically than try-
ing to determine which states had a greater or lesser need in view of the new
energy conditions. Rather than imposing direct customer rationing, which
would be nearly impossible to enforce under Indian conditions, the govern-
ment raised the price of gasoline sold to private citizens to discourage con-
sumption. But since the private use of gasoline for cars is less than 1% of
total oil consumption, the savings have been modest.
Sectorally, India's oil consumption is 49% for transport, 29%o for do-
mestic uses, 13% for mining and manufacturing, and 8% for agriculture.
Ninety percent of the transport consumption is commercial. Much of the do-
mestic consumption is for urban cooking purposes. The critical mine and
mill category is largely dependent on coal. In agriculture, oil products are
crucial for operating tube wells and dug wells for irrigation. The Indian
government adopted consumption savings schemes in 1974 which chiefly
affected the transport and domestic sectors. The industrial sector's reliance
on coal has proved to be helpful in the oil emergency.
A leading objective of oil conservation is the release of naphtha for fer-
tilizer production. Essential for increasing crop yields, fertilizer consumption
rose in India from 100,000 tons in 1950-51 to 3.2 million tons in 1973-74.
Targetted for 4 million tons for 1973-74, domestic production reached only
1.4 million tons, causing special importations, a pattern reemerging in 1974-
75 when production may not exceed 1.6 million tons. Sub-target production,
heavy import spending and a parliamentary committees criticism of the
"leisurely" pace of the domestic industry stirred the government last Sep-
'Parts of the confidential study circulated in official circles in Washington and New
Delhi were first summarized in public by The New York Times on March 11, 1974. It
has been published, apparently in verbatim form, in Mainstream (New Delhi), April
6, 1974, as "World Bank's Confidential Report on India," pp. 4-37.
PAUL F. POWER 333
tember to announce accelerated production. Power shortages and technical

and management problems have caused the Indian fertilizer industry to op-
erate at approximately 60% of capacity for several years. Naphtha has been
exported because the fertilizer industry has not been operating at capacity.
The higher prices of fuels and feedstocks have now added to difficulties.
Fertilizer imports e.g., from Japan-have declined because of world infla-
tion and purchasing competition. Deliveries from the eastern bloc, a major
external source, have been uncertain. Although the USSR pledged to double
its 1973 deliveries, 1974 shipments did not match the promise and an early
1975 trade pact disappointed India. As India has improved its crop yields it
has become more dependent on imported fertilizer because its own industry
lags behind the domestic demand.
Indian Food Problems: The fertilizer shortage is one of many problems

bearing on the agricultural and food scene. Others include the declining
annual rate of sectoral growth which at 1.7% is less than the population
growth of 2.5%, adverse weather, ecological overstress, federalist barriers
to grain movements, premodern farming techniques, fragmented land hold-
ings, ineffective central procurement, inflated costs and prices, hoarding and
black marketeering, lenient or corrupt enforcement of tax laws against pros-
perous farmers, and the persistence of hunger and malnutrition. The govern-
ment tends to fault weather vagaries for a fall of total food grain production
to 97 million tons in 1972-73 (the agricultural year ends June 30). The
1973-74 total was 103 million tons. Against a target of 118 million tons, the
1974-75 production-injured by serious drought and floods-may be no
more than 106 million tons, leaving a gap of approximately 10-12 million
tons in relation to minimum food needs for a population growing by one
million persons each month. To close the gap India imported 6 million tons
by January 1975, 5 million at commercial prices, and spent over $1 billion.
The 1974 energy crisis had a part in the disappointing domestic production,
notably through the price and scarcity of fertilizer and pesticides and the
price and reduction of oil products for use in wells and irrigation. The crisis
also indirectly added to the difficulties of India's public procurement and
distribution system whereby the urban poor have access to fixed price food
grains in ration shops. Experiencing farmer resistance to price levels, hoard-
ing and black market, the wheat part of the system was altered in March
1974 by the government to give private traders greater sway. But the reform
did not put enough grains in public channels, obliging the regime to import.
Food prices declined slightly last fall, and winter rains in the north raised
hopes for favorable spring crops.
India's 1974 food problems elicited domestic and external charges that
the government had been irresponsible in assigning declining outlays to
agriculture-$850 million for 1974-75 in contrast to $1.03 billion the pre-
vious year and $1.1 billion in 1972-73. Mrs. Gandhi's government was hard
pressed to explain this pattern and to find additional financial resources.
Demonstrating political skills, she toured several states to urge austerity,
discipline and work. In early October she made Jagivan Ram (a pragmatist
who had been Defence Minister) the Agricultural Minister in a cabinet re-
alignment undertaken to deal more effectively with food and industrial
problems. The former Agriculture Minister, C. Subramaniam, received the
Finance portfolio,6 a move widely interpreted as a shift by the Prime Min-
ister away from the academic socialism which had prevailed in the govern-
ment's ideology since her election victory in February 1971. Confirmation
of the shift came last November when D. P. Dhar, the Planning Minister,
resigned from the Cabinet as the economic realities punctured the preten-
sions of the Fifth Plan which he had overseen and Mrs. Gandhi had en-
dorsed. Whatever the realigned Cabinet does or fails to do will influence
the future as well as the present. In that future the Indian Economic and
Scientific Research Council foresees a need for 120 million tons of food
grains in 1980-81, 150 million tons in 1990-91 and 180 million tons at the
turn of the century. A 1973 Club of Rome scenario, which assumes fertility
equilibrium in 50 years, no starvation, substantial increases on the order of
the Green Revolution of the 1960s in fertilizer and crop production, and the
maximization of acreage, indicates a need to import 500 million tons in 2025,
a non-sustainable requirements
Energy Searches: Part of India's response to its energy crisis has been to
intensify its preexisting search for new sources of domestic oil which pro-
vided 7.4 million tons or approximately one-third of its national consump-
tion before the emergency arose. A crash program began to explore for oil
in off-shore and continental shelf areas. Overcoming political reservations,
the government contracted with American firms last August to begin to ex-
plore the Bengal and Kutch basins. India will share in oil produced from
any discoveries while the foreign firms take the entire risks of exploration.
These contracts followed the pre-crisis start of Indian explorations in Bom-
bay High undertaken with a drilling rig made in Japan with American tech-
nology. Advised by an American firm, the Bombay High project established
its first well last April. This past January the Petroleum Ministry announced
that the field was viable and estimated an annual output of one million tons
in 1976 from the three struck wells. The Minister of Petroleum and Chemi-
cals, K. D. Malaviya, envisaged near self-sufficiency in oil in the next six to
seven years when he reported the news to Parliament, a view some observers
found euphoric.
Russia, which has aided the construction of Indian refineries and acted
as an oil advisor, has recently been brought into further efforts to increase
the production from proven wells in Assam and Gujarat. American and
Rumanian equipment will be involved. The Oil and Natural Gas Commission
is using Soviet equipment to explore gas and oil sites in Kashmir. Geological-
'As interim head of the new Congress following the party split in 1969, Subraman-
iam contributed the "Quit Poverty" ("Garibi Hatao") slogan which Prime Minister
Gandhi popularized until it became subject to recent criticism. His observations on In-
dian agriculture, poverty and development are found in C. Subramaniam, India of My
Dreams (New Delhi: Orient Longman, 1972).
"M. Mesarovic, E. Pestel and M. Guernier, "A Computer Warning of Hunger To-
morrow," UNESCO Courier, July-August 1974, pp. 3-34, 68.
PAUL F. POWER 335
ly difficult for oil searches, India has not been fully explored. Unless the
Bombay High or another off-shore find becomes productive on the British
or Norwegian model the South Asian state will continue to be critically de-
pendent on imported petroleum.
In coal India is nearly self-sufficient and a net exporter. There is a
shortage of metallurgical coal. Seventy percent of the energy in industry
comes from coal. Production reached a high of 80 million tons in 1969-70
but fell under 74 tons in 1972-73. Some observers blame the 1972 nationali-
zation of the mines for the decline and evident stagnation. The Fifth Plan
target of 135 million tons by 1979 seems unrealizable owing to the massive
investment required. Although Indian coal is high ash, a stepped-up export
strategy to help pay for oil imports may have merit; but again the need for
heavy investment and modernization is noticeable.8 Poland is aiding ex-
traction. Deriving oil from Indian coal would require enormous sums and
sophisticated technology, a problem shared with the West. Limited substitu-
tion of coal for oil will emerge in the short-run, but a non-selective strategy
would be regressive. About 40%o of the country's heavy-fuel generation
equipment could be changed over to coal, but unfortunately the coal may
not be available for the switch. Despite enormous reserves, India's coal
production has not kept up with rising demand.
India's coal and oil problems affect its power industry which has yet to
meet the target of any Plan. Power shortages have long hampered Indian
development. The Fifth Plan seeks to add generating capacity four times
greater than the increment added under the Fourth Plan. The prospects are
not bright. Based on past experience, there are potential difficulties in the
supply of adequate fossil fuels, sufficient water for hydro units, the avail-
ability of cement and steel for new units, and adequate funding by Indian
states which have financial jurisdiction over this vital industry. Moreover,
because electricity is a concurrent subject in Indian federalism, the coordi-
nation of the power industry is an onerous task. Thermal generating units
have received the greatest stress in Indian power development because, de-
spite the country's enormous hydro resources, the vast expense and long
gestation period required to harness them tilted priorities toward thermal
facilities. This pattern is likely to continue since the energy situation has
forced the Indian government to defer new investments in the coal and power
industries.
India's power industry is partly nuclear, a fact to which world attention
was drawn last May 18 when India exploded a nuclear device in Rajasthan.
The event stimulated discussions of its strategic and military meanings.9
There was a momentary improvement in public morale, and a serious rail
8Swaninath S. Aiyar, The Times of India, October 14, 1974.

9The Indian explosion could not be "peaceful" according to George H. Quester,
"Can Proliferation Now Be Stopped?" Foreign Affairs, LIII (October 1974), pp. 77-97.
Assistant Secretary of State Alfred L. Atherton, Jr., testified that the event did not alter
the South Asian "balance." See Hearings before the Sub-Committee on the Near East
and South Asia, Committee on Foreign Affairs, House of Representatives, 93rd Congress,
2nd Session, September 19, 1974 (Washington: GPO, 1974), p. 25.
strike in progress at the time of the explosion ended soon there

ing the explosion as a logical extension of its peaceful atomic ac
pledging not to proceed to a weapons stage, the government def
against charges in the Western press and by the Japanese and Pakistani
governments that the step represented at a minimum unsettling proliferation
and a waste of scarce resources by a needy country. Estimates of the ex-
plosion's cost range from $400,000 to $3 million. The breakthrough may
rebound to India's prestige and leverage, and energize new arms control
efforts.
For immediate energy needs the explosion has had no positive results.
In October the USSR promised to share its know-how on controlled, nuclear
explosions. Yet H. N. Sethna, head of the Indian Atomic Energy Commis-
sion, agreed that the explosive power of May 18 (10-15 kilotons) would not
be sufficient to secure oil from shale in Gujarat, indicating that a hydrogen
device would be necessary. Whatever the illusions or the energy-finding po-
tential of the nuclear explosive program, the energy input from India's
atomic reactors is now 3.3% of the nation's power capacity and is to rise to
4%o by 1979 if the necessary finances and special materials are forthcoming.
Atomic energy will have a modest future in the nation's total energy scene
for many years to come.10
Anti-Regime Pressures: India's 1974 plight stimulated and served as a

rationale for anti-regime pressures that by the year's end brought Prime
Minister Gandhi's popularity to a low ebb. These included an easily de-
feated, no-confidence motion in the Lok Sabha in July which focused on
the economy; an anti-Congress movement with national repercussions led
by the Gandhian Jayaprakash Narayan in Bihar; the assassination early this
year of the Railway Minister, L. N. Mishra, who had been accused of cor-
ruption; disorder in Gujarat and other states relating to shortages and in-
flation; youthful discontent in the Congress party over leadership excuses
for low performance; intense opposition pressure in Parliament concerning
an import license scandal reportedly implicating Congress MPs; and pene-
trating criticisms of the regime brought by Girilal Jain of the Times of India,
G. K. Reddy of The Hindu and other analysts. Asking for sacrifice, the gov-
ernment took some decisive steps such as a drive against hoarders and
smugglers and demonstrated its skill in managing pressure without provid-
ing the systemic transformation demanded by an expanding range of opinion
segments.
Inheriting a massive deficit, the government approached the 1974-75
budget with pledges to use fiscal and monetary policies to control demands
and reduce the deficit. New taxes were introduced in the spring and again
in August to combat inflation and pressures on critical items and to raise
additional revenue. There were increases in excise and customs duties and
"India has large thorium deposits which some Indian commentators foresee as a
foreign exchange earner and resource for India's fast-breeder, thermal reactor program
now in a prototype stage. Yet the United States AEC estimates that no substantial use
for thorium is likely in the next 100 years.
PAUL F. POWER 337
revisions of wealth and corporation surtax rates. Railway

rates were increased. Wage increases for 18 million public
employees were impounded. Partly balancing these steps, personal income
taxes were reduced slightly and the tax exemption floor was raised. The
public sector is expected to be a revenue source as it was in 1973-74. Despite
India's hegemonic position in South Asia and the absence of a Chinese
threat, no reductions were made in defense spending which amounts to about
$2.5 billion. Although the amount is only 3.6% of the GNP, which is nearing
$70 billion, the tenth largest in the world, the military budget is 22% of
the total budget. There are possible savings, particularly in the foreign ex-
change component that amounts to about 11% of the military budget. It may
be increased by an emotional response to the forthcoming American-Paki-
stani arms sales.
In response to economic challenges, the Congress party has begun to
reassess over leftist objections statist policies in agriculture and industry,
and the Planning Commission has initiated a reassessment of the smitten
Fifth Plan. Among the matters deserving particular attention are taxation
policies with a view to increasing private investment and employment; a
redefinition of "core" industries; excess capacity in heavy industry; trans-
portation efficiency; the protection of stored grains; birth control strategy;
land tenure and production prerequisites for a second Green Revolution;
escalating police budgets; constitutional barriers to securing a greater return
from taxes on agriculture and to central direction of the power industry;
and the coordination of exports and imports.
Foreign Trade: India expects to improve its chances of surmounting

current difficulties through a vigorous export program and a prudent import
strategy. As a continental nation India has not had an export compulsion.
But beginning in 1972 export efforts increased with some success when the
government began to realize how vital foreign exchange is for a country
seeking to pay its own way in the world economy. Indian planners also
convinced the government that the base, performance and reputation of In-
dian manufacturing industries would be enhanced by exporting engineering
and other non-traditional goods. Entering the oil crisis, the government
stated its determination to press exports to meet the present challenge. The
Indian Institute of Foreign Trade estimates that exports must grow at an
annual rate of 12.8%o over the 1973-74 level to meet import requirements
in the next five years. Recent increases in exports have reflected inflation
more than changes in volume. Given inflated commodity and natural re-
source prices, India is hopeful of obtaining higher prices for such export
items as jute products, tea, iron ore, sugar, oilcakes, coffee, silver, bauxite
and cotton textiles. Recent world prices for the first three of these have been
uncertain; sugar and silver have been in high demand. India may have to
realign its export strategy to stress without devaluating the rupee those
products with the best earnings potential in the new Indian and world con-
ditions."1 Indian excise taxes on some of its successful exports discourage

optimal returns.
India anticipates that the 1973 agreement with the European Economic
Community will improve the Indian position as to tariffs, volume and kinds
of items sold to Western Europe.12 About 25% of India's exports go to the
EEC with which India has a negative, but improving, balance of trade. The
EEC membership of the United Kingdom, a customary market for Indian
exports, makes India's relations with EEC of compelling importance. More-
over, India is determined to improve its low-profile position in the difficult
and affluent American market. India achieved its first favorable balance of
trade with the U.S. in 1972-73, although 1973-74 showed a deficit. Indian
sales, 80% in natural products, were $358 million in 1972-73, rising to $457
million the next year. Indian imports from the U.S. were $291 million and
$658 million during the respective years, chiefly in machinery, metals, fer-
tilizers and food. The U.S. was India's second trading partner in 1973-74,
placing behind Japan and ahead of the Soviet Union and Britain.
India is anxious to obtain a larger share of the cotton goods and sugar
markets in the U.S. and to sell more engineering products. Purchasing from
America 5 million tons of the 6 million tons of food grains imported in
1974-75, India faced purchasing along with selling competition in the United
States. Sought by India, a joint Indo-American commission with potential
economic and commercial benefits to India (and modelled on a fruitful Indo-
EEC commission) was established in October 1974 during Secretary of State
Kissinger's visit to New Delhi. The slight improvement in Indo-American
political relations which emerged in 1974 made the commission possible and
may aid its work.
Political as well as economic factors impinge on India's economic re-
lations with Eastern Europe. India's intention to build a socialist pattern of
society and Soviet policy toward India and the Third World, especially in
the context of the Sino-Soviet dispute, resulted in Soviet technical assis-
tance and sales against credits for Indian defense and steel industries, among
others, in the public sector. The Indian government and Eastern bloc states
have been less than keen to reveal the details and performance of these
transactions.13 It is known that, except for 1973 when the USSR loaned
India two million tons of food grains to be repaid in kind, over the last few
years there has been a net transfer of Indian resources to the USSR. The
condition is an outcome of the intertwined realities of trade and aid between
"Angus Hone, "Trade Balance and Balance of Payments in the Fifth Plan," Eco-
nomic and Political Weekly, IX (February 1974), pp. 291-300. India fears that LDC
exports would be first casualties in a world depression. Y. B. Chavan, "Correcting the
International Disequilibrium, " Eastern Economist, Feb. 7, 1975, pp. 273-4.
"See Michael Lipton and Peter Tulloch, "India and the Enlarged Community,"
International Affairs, L (January 1974), pp. 49-66.
"3Data and interpretations may be found in J. D. Sethi, "Indo-Soviet Cooperation
at a Turning Point," Point of View, IV (December 8, 1973), pp. 10-12; M. Sebastian,
"Does India Buy Dear From and Sell Cheap to the Soviet Union?" Economic and
Political Weekly, VIII (December 1973), pp. 2141-2150, concluding negatively; and
R.V.R. Chandrasekhara Rao, "Indo-Soviet Economic Relations," Asian Survey, XIII
(August 1973), pp. 793-801.
PAUL F. POWER 339
the two states-i.e., Indian repayments of Soviet loans made at 2.5%o in-
terest with payment spread over ten to twelve years and three years grace
have more than offset India's favorable balance of trade with the Soviet
Union.
This phenomenon of negative net aid transfer is the reverse of the
situation which logically ought to obtain between a superpower and a less
developed country. It is a sensitive issue for the Gandhi regime abroad,
although not at home. The condition is partly explained by the fact that
India is using exports to the USSR to pay for Soviet military aid to India
amounting to about $1.4 billion during the 1956-73 period. Indian optimists
believe that the imbalanced condition is a short-run matter that will be
settled when Indian debts are rescheduled and bureaucratic and Soviet con-
sumption problems are resolved. India deals with the socialist bloc countries
in rupees, an attractive arrangement for a country with constant pressure
on its foreign exchange reserves. Indian officials consider that this feature
outweighs all other problems in Indo-socialist economic relations.
Although the turnover of Indian trade with the Eastern bloc has been
less than the governments involved anticipated, in the past decade the volume
has climbed at an average annual rate of 8.6%o in contrast to 1.1% for the
rest of the world. In 1973-74 the USSR was India's third highest trading
partner, with Indian exports of $378 million and Indian imports of $333
million. An Indo-Soviet commission, established in September 1972, over-
sees economic, scientific and technical cooperation and receives considerable
publicity as a vehicle for opening "new vistas." The joint commission is
intended to dovetail the countries' five year plans. One "new vista" is the
15-year Indo-Soviet pact signed at the conclusion of Leonid Brezhnev's
heroic-style visit to New Delhi in November 1973, on the eve of India's emer-
gency. The countries pledged to double trade in the next five years. Although
the USSR promised to almost double the 1973 sale of petroleum products
and to extend assistance to India's steel and coal industries, no valuable
crude oil was included and there were no new grants or credits. There were
reports in the fall of 1974 that the USSR had promised to provide 2 million
tons of food grains to India following Foreign Minister Swaran Singh's visits
to Moscow. As of mid-February 1975 the reports were unconfirmed. Even
if the unquestionably helpful food aid should materialize, the move should
not detract from the urgent need to solve the problems of unbalanced, normal
trade and negative net aid transfer that exist in Indo-Soviet relations.
On imports, the government has identified industries to receive favored
import treatment consistent with inflation and scarcity. India's heavy im-
ports in 1973 caused the government to tighten import licensing and related
controls to conserve foreign exchange and to press forward with import
substitution in the key areas of energy, metals and fertilizers. Based on past
policy, there are few consumer goods except food grains and pharmaceuti-
cals on the import list. Restraints on imports must be selectively and creative-
ly conducted to avoid supply dislocations, shutdowns and shortages.
Principally because of more and costlier imports, India had a $589
million trade gap for the year ending March 31, 1974, a reve
towards smaller deficits and following a slightly unfavorable balance the
year before which resulted from the radical decline in net transfers of
foreign aid. There was an export surge last fall but the terms of trade de-
teriorated. The 1974-75 trade gap is expected to be a huge $1.7 billion, re-
flecting the escalated oil bill and emergency food purchases. An impressive
drive to earn foreign exchange and to limit non-essential imports has been
undertaken and must continue if India is to avoid floundering. The cost of
expensive oil imports alone is likely to consume between 50 to 80% of
India's export earnings over the period of the Fifth Five Year Plan, an in-
crease from 20% for the last year of the Fourth Plan. Reacting to this dis-
tinct possibility, the Indian government began in 1974 to utilize existing
credits and search for new credits.
External Borrowing: As of early 1974 India was spending 26% of its

export earnings to service its external debts. The anticipated increase of
$900 million in the 1974-75 import oil bill will be equivalent to a doubling
of India's debt payments in addition to balancing off all net external assis-
tance pledged to 1974. For several years India has sought and obtained an-
nual debt relief from the Aid-to-India Consortium, a major means to free
foreign exchange. Debt relief is not debt forgiveness; any additional stretch-
out means that India will be paying interest on loans into the next century,
contrary to the expectations of the Fifth Five Year Plan. In mid-1974 the
Consortium endorsed $194 million of debt relief, a disappointing response
to the World Bank's recommendation of $248 million or 45% of debts due
in the FY ending March 31, 1975. India had sought a 75%o relief. The
Consortium approved in principle a total of $1.3 billion of pledges to assist
India during the first year of the Five Year Plan, nearly one-third greater
than the 1973 pledge. The World Bank had recommended a total of $1.385
billion.'4
The shortfall in the Consortium's debt rescheduling may be explained
by a depressing impact of India's atomic explosion which India's M. G. Kaul
had assured the Consortium meeting in Paris was for peaceful purposes and
had not represented a diversion of essential funds from pressing sectors.
Japan reduced its pledge by $10 million below the amount of aid provided
in 1973 ($117 million) to protest India's nuclear test.15 The debt relief gap
may also be explained as the results of bargaining involving the Indian
government, the World Bank staff, the Working Party of the Consortium,
and the full Consortium. Additionally, there may have been indirect bar-
gaining between the full Consortium and non-Consortium sources of aid
to India, such as the International Monetary Fund (IMF), the oil-exporting
nations and Eastern Europe. Encouraged by H. J. Witteveen, Managing Di-
rector of the IMF, an oil-facility was established in August 1974 to make
loans to IMF members with balance of payment difficulties caused by the
4"World Bank's Confidential Report on India," op. cit., p. 26.

i5Japan Report, July 16, 1974, p. 8. Sweden, however, increased its past contribu-
tion by 30%o.
PAUL F. POWER 341
world oil inflation. The facility is in addition to regular IM

sources. Based on loans by Iran, Canada, Venezuela and four
ducers, the facility consists of 2.8 billion expressed in Special Drawing
Rights (SDRs), of which India's share is $504 million. India drew 200
million SDRs in October, an obligation carrying a 7% interest charge com-
mencing in three years with the loan payable in seven years. The terms are
less onerous than those for commercial loans, but they are not especially
attractive to India and other borrowers such as Bangladesh, Chad and El
Salvador. (The terms have been liberalized for 1975.) India and other
LDCs are uncomfortable with a parallel non-decision, namely, that link be-
tween SDRs and development assistance to poorer nations which they have
been seeking is not likely to emerge because the IMF's affluent members
believe such a linkage would be inflationary.
As to the oil exporters apart from the IMF oil-facility, Iran and Iraq
have loaned India approximately $250 million, but the repayment period
is short, burdening India. Owing to the reluctance of other oil exporters and
the U.S., a relief fund proposed by Iran which would draw from the indus-
trial nations as well as OPEC members has not materialized. India's recent
acceptance of a PLO office in New Delhi may improve the climate for Indo-
Arab dealings. India may have to wait for the realization of a trilateral
energy conference on the Franco-Iranian model which New Delhi supports
before the affluent states and oil exporters move ahead on additional and
substantial relief for the impacted LDCs.
The East Europe reaction is the most obscure of the external responses.
Gross socialist aid of some $300 million may emerge for FY 1974-75. The
Eastern bloc would provide significant relief if it were to increase the volume
of exports and aid to India, liberalize aid terms which compare unfavorably
with Consortium terms, and expand the categories of goods which India is
allowed to import from Eastern Europe.
Although Secretary of State Kissinger spoke of India's special leader-
ship role in South Asia and the world, endorsed non-alignment and referred
to a "dramatic" improvement in Indo-American relations during his New
Delhi visit last October, the U.S. bilateral part in relieving India's distress
has been minimal so far. In last June's Consortium meeting the U.S. pledged
$75.6 million in new aid and $45 million in debt relief. But in retaliation
for India's nuclear explosion or using it as a pretext, Congress reduced the
aid to $50 million on the eve of the Kissinger visit to New Delhi."6 Subse-
quently India showed inconsequential interest in the available aid. Congress'
reduction justified India's diffidence in approaching the U.S. earlier for re-
sumption of assistance. India fared no better on food grains, seeking about
one million tons from the U.S. but obtaining only 300,000 tons on 2-3%
credit, repayable in 40 years. (But the amount may be increased to 500,000
"6See Report of the Committee on Foreign Affairs on H.R. 17234, (Washington:

GPO, 1974), Section 29, which reads in part: "In addition, the diversion of financial
resources to its nuclear program raises questions about India's priorities at a time when
mass famine threatens that country." The Executive Branch had informed Congress
that the Indian nuclear explosion had cost one half of one percent of the national budget.
tons.) At India's insistence the loan is to be repaid in dollars, a "clean"

transaction according to T. N. Kaul, India's Ambassador to the U.S., in con-
trast to the earlier counterpart arrangements. At the insistence of the U.S.,
the grain may not be transferred to others. The surfacing of resumed arms
sales to Pakistan clouded all Indo-American relations in March 1975.
There was never any question whether there would be resumption of
the large scale economic and food aid of the past, valued at $8.9 billion. In
early 1974, in Ambassador Daniel P. Moynihan's only major public address
during his tenure in New Delhi, he recognized the historic nature of such
assistance and endorsed India's target of zero net aid by the end of the Fifth
Plan-now an impossible goal.17 The American response to date to India's
1974-75 plight is modest in relation to the U.S. responsibility for the non-
resolution of the Arab-Israeli dispute which impelled the Arab oil producers,
the core of OPEC. to initiate the high price structure that has retarded In-
dian development.
It needs to be noticed that, despite the fact that neither the U.S. nor
India has described the resolution of the problem as providing bilateral as-
sistance, it was extended to India through the settlement of the rupee ac-
counts accumulated in India under the workings of PL 480. Following as-
siduous efforts by Ambassador Moynihan in Washington and New Delhi,
agreement was reached in late 1973 shortly before the energy emergency
surfaced.18 Effective in February 1974, a pact allowed the two governments
to dispose of an awkward situation and, to India, a demeaning condition,
involving a huge obligation of $3.3 billion in non-convertible rupees. India
agreed to pre-pay in dollars $64 million of the liability, and the U.S. agreed
to transfer $2.2 billion of the total obligation to India to be attributed to
Plan projects without actually adding to the country's financial resources.19
To improve Indo-American relations, which had been severely injured by
the Nixon-Kissinger policies towards South Asia in 1971 and by Indian
perceptions and manipulations of those policies, and not wishing to have
India as a debtor, the U.S. released India on generous terms from an enor-
mous, growing liability. The American action on the eve of the start of the
serious Indian difficulties has functioned in Executive and Congressional
perspectives to minimize U.S. responsibility to provide emergency or long-
term assistance to India.
"Official Text, Address by Ambassador Moynihan to the Indian Council of World

Affairs, New Delhi, January 17, 1974. Published in India Quarterly, XXX (January-
February 1974), pp. 5-11.
"8For text and hearing chaired by Representative Lee H. Hamilton, see Indian
Rupee Settlement Agreement, Hearing before the Sub-Committee on The Near East and
South Asia, Committee on Foreign Affairs, House of Representatives, 93rd Congress,
2nd Session, January 29, 1974 (Washington: GPO, 1974). The rupee settlement had
critics in Congress which probably would not have passed the agreement if the Nixon
Administration had been obliged to submit it to a vote. The settlement has no effect on
outstanding U.S. dollar loans to India, amounting to more than $3 billion, which India
has been repaying on a regular basis at around $130 million each year.
"An amount of $1.1 billion of blocked rupees are being kept intact in India to pay
for official American expenses in India and Nepal and the shipping costs of private
agency donations. Retained rupees will also be used to cover one-fourth of $100 million
of Indian exports for the United States government's use, thereby assuring India of $75
million in dollar earnings.
PAUL F. POWER 343
Multilaterally, the U.S. has continued to perform a positive role in the

multilateral World Bank Group from which India has long derived assis-
tance, especially from the International Development Association (IDA)
which typically makes untied, low or no interest loans, repayable over fifty
years. India has been securing between 36 to 40% of IDA's lending, a per-
centage the U.S. wishes to hold to 35%o. IDA has been receiving one-third
of its funds from the U.S., whose share is to drop to one-fourth in 1975.
After serious difficulties in Congress, partly linked to India's nuclear ex-
plosion, the legislature adopted, on the recommendation of World Bank
President Robert S. McNamara and the Nixon and Ford Administrations, a
$1.5 billion, four year replenishment for IDA. The replenishment act forbids
the U.S. representative on the IDA board to vote for loans to countries which
had exploded nuclear devices but had not signed the non-proliferation treaty,
a prohibition aimed at India. Although the Executive Branch views the pro-
vision as a minor impediment to IDA lending to India since IDA action
cannot be blocked by the U.S. alone, there is, at a minimum, a new irritant
in Indo-American relations and potentially a climactic deterrent to IDA's
favorable consideration of Indian requests.
Conclusion
India's gross assistance needs for the fiscal year ending March 31, 1975
have received substantial attention from the Indian government and to a
lesser and varying extent from external actors, especially the World Bank
Group. Traditional, national friends have been less than effusive in their re-
sponses. In absolute and relative terms the capitalist democratic nations have
been more forthcoming than the communist states. India has prudently
avoided commercial loans. The magnitude of the gross assistance needs are
about $2.5 billion to cover an immense trade deficit of about $1.7 billion
and debt service of about $730 million. All borrowings and debt reschedul-
ing as of mid-February 1975 suggest that they will come close to meeting
total needs. The sources and amounts are the Consortium (including IDA)-
$1.3 billion; IMF (regular) -$280 million; IMF (oil facility) -$240 million;
oil exporters-$250 million; and Eastern Europe-$300 million gross.20
There will be a gap of about $130 million. This amount can be met from
India's none-too-substantial foreign exchange reserves which were $1 bil-
lion as of February 1, 1975. Importantly, India's gross assistance needs for
1975-76 are likely to be about the same as for 1974-75. Owing chiefly to the
Consortium and the IMF, including its enhanced oil facility, the needs will
probably be nearly met once again.
As of the winter of 1974-75, the Indian regime may be said to have
coped with the energy emergency in its external and domestic aspects without
"The net transfer of foreign aid from all sources for 1974-75 may be $1.2 billion
compared with about $605 million in 1973-74, a jump from the nadir of aid to India in
1972-73 of $214 million which marked the end of the slide from the peak of $1.3 billion
in 1965-66. For 1974-75 the UN Emergency Fund provided India with a $32 million
grant to import fertilizer and the EEC made a $100 million grant to India for food
purposes.
losing its diplomatic balance and its control over public order and the
maintenance of democratic processes. The Congress government remains
under heavy pressure from domestic critics to achieve higher levels of creativ-
ity, discipline, efficiency and probity in all organs of the regime. Although
preparations for the next General Election may produce a leftist idiom,
Prime Minister Gandhi's government is apt to continue the decentralist,
flexible tack toward the private sector adopted in early 1974 and to dilute
doctrinaire socialism. Simultaneously, the Congress government is likely to
consolidate and perhaps increase those steps taken in 1974 to mobilize ad-
ditional revenue, combat inflation and corruption and manage more effec-
tively and vigorously the public sector and foreign trade activities. Fifth
Plan ambitions are being adjusted to near-term efforts which will be suc-
cessful if they can maintain the economy's 3.5% long-term growth rate.
Import reduction and energy conservation measures are essential in the
short-run to offset the impact of inflation and shortages. A productive ap-
proach would be to expend additional resources to benefit agriculture and
the critical fertilizer industry, and to expend less on the expensive, sluggish
steel industry and the outsize military.21
The Indian economy has positive features: a private sector with un-
tapped investment capacity; considerable improvements in the utilization of
non-project aid; an impressive base for capital goods; a growing pattern of
import substitution; some liberalization of controls that needs to be ex-
panded and extended to foreign investors who tend to shun India;22 and
increasing numbers of professional farmers, managers, scientists and tech-
nicians.
Demonstrated by the nuclear explosion, India has achieved scientific
feats that provide an ethos essential for long-run development. If the nuclear
program becomes military, India's borrowing capacity will be jeopardized.
A pressing issue is whether India's scientific technology is capable of cor-
recting in the near term conditions whereby half of the energy consumed is
derived from cow dung, firewood and vegetable waste, the per capita yearly
income is $110, and 40% of the people live below the poverty line ($65
annual income). Removal of poverty is one of the two overarching goals of
India's Plans. Tragically, the 1974 emergency set back the growth and dis-
tributive activities that work towards this objective.
The attainment of economic self-reliance is the second major goal of
recent Plans. Caused or supported by cultural, intellectual and physical fac-
tors, but also by agricultural and industrial progress, self-reliance has been
21Earlier advice of an economist, a critic of foreign aid, to stress agriculture and

scale down the public sector is found in B. R. Shenoy, Indian Economic Policy (Bom-
bay: Popular Prakashan, 1968), esp. vi-x. In December 1973, eleven years after the
Indo-Soviet Bokaro steel complex was initiated, it produced its first steel ingots!
"Despite the American government's encouragement of American private invest-
ment in India's fertilizer industry and the Indian regime's relaxation of controls in the
1960s, there was no substantial response from American investors owing to ideological,
bureaucratic and interest group conduct in India. See W. D. Posgate, "Fertilizers For
India's Green Revolution: The Shaping of Government Policy," Asian Survey, XIV
(August 1974), pp. 747-748.
PAUL F. POWER 345
extrapolated by Indian elites into an ideological theme seeking near self-

sufficiency.23 Periodically the theme is shown to be illusory because of criti-
cal shortages in strategic resources-scarcities induced by maladministra-
tion, costly imports, turmoil, low productivity and, not least of all, adverse
weather. A less ideological rendering of self-reliance would prevent a re-
currence of regime over-confidence about food self-sufficiency such as that
found in 1970-72, which contributed to the untoward situation of 1972-74
when unfavorable weather forced the spending of scarce exchange for in-
flated grain imports, and the demoralization that follows the undermining
of those hopes and expectations of economic nationalism that do not attend
to India's need to deal with and benefit from the international economy.
India's internal responses to the energy emergency have contained both
resourcefulness and conventional ideas and methods. Some "remedies" are
cul de sacs. Reductions have impeded development. Old and new critics have
asked the regime to place the quality of the political system and not only
the Congress party's survival at the summit of the national agenda before
the next General Election which the Gandhi government may call before
1976. "Aided" by an imperfect international environment that has yet to
restructure North-South relations as opposed to making loans and selling
food or doing little to transfer resources, the Indian regime faces its most
serious challenges internally as it works to keep 20% of the world's people
on a developmental path.
"3Paul F. Power, "On Ideologies in Indian Foreign Policy," The Indian Political
Science Review, VIII (January 1974), p. 6.
PAUL F. POWER is Professor of Political Science at the University of Cincinnati.

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The Energy Crisis and Indian Development

Author(s): Paul F. Power

OTHER COUNTRIES MAY have experienced more severe dif-

respecting development is one which eliminates foreign aid. But, unlike

Preexisting Variables and Emergence of the Crisis

India will increase Indian technical personnel aiding industrial projects in

the Plan estimated.5 Stressing India's limited foreign exchange

Domestic Self-Help Efforts

India's recent difficulties have given new significance to national poli-

tember to announce accelerated production. Power shortages and technical

Indian Food Problems: The fertilizer shortage is one of many problems

8Swaninath S. Aiyar, The Times of India, October 14, 1974.

strike in progress at the time of the explosion ended soon there

Anti-Regime Pressures: India's 1974 plight stimulated and served as a

revisions of wealth and corporation surtax rates. Railway

Foreign Trade: India expects to improve its chances of surmounting

ditions."1 Indian excise taxes on some of its successful exports discourage

External Borrowing: As of early 1974 India was spending 26% of its

4"World Bank's Confidential Report on India," op. cit., p. 26.

world oil inflation. The facility is in addition to regular IM

"6See Report of the Committee on Foreign Affairs on H.R. 17234, (Washington:

tons.) At India's insistence the loan is to be repaid in dollars, a "clean"

"Official Text, Address by Ambassador Moynihan to the Indian Council of World

Multilaterally, the U.S. has continued to perform a positive role in the

21Earlier advice of an economist, a critic of foreign aid, to stress agriculture and

extrapolated by Indian elites into an ideological theme seeking near self-

PAUL F. POWER is Professor of Political Science at the University of Cincinnati.

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