INDIA: Letter to Three Companies

Like most of Asia, in the days before Mossadegh, India lit its lamps and powered its gasoline engines largely with Abadan petroleum. Then Abadan shut down. India, pinched for oil (it had to cut civil air traffic 20%), awakened to the fact that it was refining only about 6% of the oil it consumed.

The new state decided that it must refine its own, and that it needed help. But here it ran smash into its own hostility to foreign businessmen. To get oil, India would have to break with old prejudices.

Last week it manfully did. In a letter to the U.S.-owned Standard-Vacuum Oil Co., India's government promised to change its ways and its laws, persuaded Standard-Vacuum to build a $35 million refinery near Bombay. Specifically, the government would scrap the law that Indians must own 51% of the stock of a foreign company. It would give unbreakable guarantees against nationalization for 25 years at least. The refinery will be allowed to import crude oil free of duty, and will get tariff protection.

Similar offers went to Caltex of California and Britain's Burmah-Shell. In return the three outfits would promise to train Indian technicians, employ as much Indian labor as possible, and stimulate Indian industries. By 1955 the companies hope to have three oil refineries worth $100 million, producing two to three million tons of refined products a day. A compact advantageous to both parties, it is also welcome as the first major investment of private U.S. capital in India since India won its independence.