Reference: Our letter No. 85 of January 22, 1953.?

You will recall that in my letter under reference I informed you that we would shortly be sending forward our views on the lessons which might be learned from our experience with the Bombay State Transport Corporation and which might be applied in any future examination of projects qualifying for our aid under the Colombo Plan.

2. We have now received from Mr. Ranking, who was closely associated with the protracted and tedious negotiations with the Corporation, the attached memorandum dated February 10. I think you will agree that Mr. Rankin¹⁷ has done a very able job. We concur with his recommendations. All are important but it seems to us that Nos. 1 and 12 are perhaps the most important: No. 1 because, if it is followed it will mean that the mere fact that we do not deal with local state organizations will keep us free of the political and administrative entanglements which such relations involve; No. 12 because it seems to us that it is extremely important that we should be able to assure the Canadian tax-payer that the equipment which is bought with his dollars is being adequately protected.

3. We are sending a copy of Mr. Rankin's report to Mr. Cavell in Colombo.

GRAHAM MCINNES¹⁸

[PIÈCE JOINTE/ENCLOSURE]

Note du secrétaire commercial à Bombay pour le haut-commissariat en Inde

Memorandum from Commercial Secretary in Bombay to Office of High Commissioner in India

COLOMBO PLAN

It was agreed during my visit to New Delhi that it would be useful at this juncture to record our experiences in connection with the application of Colombo Plan assistance to projects in India as a useful guide in any further negotiations.

My association with Colombo Plan has been primarily with the Bombay State Road Transport Corporation. I have reviewed my file covering the numerous complications that have arisen in the last 18 months and as a result have the following comments to make:

1. When State Government agencies are recipients of Colombo Plan assistance from Canada, arrangements with the Government of India should be made at the outset, designating clearly the State Officials responsible for the discussion of details. As our dealings are with the Government of India, the appropriate line of communication can break down and confusion arise when State Government officials come into the picture.

Example: P.V.R. Rao, Finance Secretary, Government of Bombay and Major General G.D. Young, General Manager, Bombay State Road Transport Corporation, made arrangements to proceed to Canada to finalize the aid for the Bombay State Road Transport Corporation without first being accredited by the Government of India to act on its behalf. Similarly, discussions took place with these and other State Government officials of which the Central Government had not been apprised simultaneously. Note also the present proposed visit to Canada of Mr. Bhaunik of the Electricity Division of the Government of West Bengal in connection with hydro-electric equipment for Mayurakshi.

2. We should avoid granting assistance by provision of equipment from Canada where an indigenous industry exists or facilities are even partially available locally.

Example: Negotiations were well advanced with the Bombay State Road Transport Corporation before we realized that Premier Automobiles, Bombay, intended resisting the provision of vehicles from Canada, other than from their principals, to the extent of exerting influential political pressure. The announcement of the Indian Tariff Commission inquiry into the automotive industry of this country at about the same time was also an unfortunate coincidence.

3. We should avoid a project because of highly regarded personnel in the management whose association may be suddenly terminated.

Example: The existence of Major-General G.D. Young, General Manager, and Commander Arthur van Rhee, Director and Manager of the Central Workshop and Assembly Depot, had considerable influence on our recommendation of the Bombay State Road Transport Corporation as a project worthy of Colombo Plan assistance. At the same time as the arrival of the vehicles from Canada, General Young and Commander van Rhee received notice of the termination of their contracts.

4. We should avoid projects where our aid may be used upon receipt in ways other than originally intended.

Example: It was considered that the principles of the Colombo Plan were being met in the case of the Bombay State Road Transport Corporation in providing vehicles that would improve the inadequate transport facilities existing in this State. Since the arrival of the first shipment of vehicles, however, the new Chairman of the Bombay State Road Transport Corporation, in order to avoid the threatened strike of private operators, has now decided to use the trucks primarily on Government of Bombay haulage jobs within the city of Bombay.¹⁹

5. We should avoid the provision of assistance to projects which will not be complete projects as a result of such aid -- risks exist when the balance, on which the merits of the project as a whole may depend, may be abandoned or delayed for one reason or another.

Example: The 835 trucks now being delivered to the Bombay State Road Transport Corporation would only nationalize about 15% of the State freight road transport. The new Chairman of the Corporation has abandoned or postponed the nationalization of freight traffic as he now considers it unlikely that additional vehicles will be forthcoming in the foreseeable future.

6. We should avoid projects which are partially nationalized and where policy indicates the whole will become nationalized to the cost or detriment of private industry.

Example: When the Bombay State Road Transport Corporation was first formed and took over the passenger services in the State, private bus operators were compensated. It was assumed that similar procedure would be followed in the case of nationalization of freight transport, but it has now been announced that freight transport nationalization, when it takes place will be done without compensation to private operators. The Private Operators' Association have already made reference to Canada's part in depriving them of their livelihood.

7. We should attempt to avoid projects where exactly similar projects exist in other States.

Example: Several other states in the Indian Union with nationalized transport corporations have questioned why Bombay State has received aid in preference to themselves.

8. We should avoid projects where lack of proper maintenance of Canadian equipment may reflect on Canadian industry to the detriment of our private trade potential.

Example: The new Chairman of the Bombay State Transport Corporation has scrapped the maintenance schedule of the transport fleet which the former General Manager has taken two years to build up. The quick deterioration of Canadian vehicles now entering the fleet which may result from inadequate maintenance programmes will not be a very good advertisement for the Canadian automotive industry, to say nothing of the wastage of our aid.

9. We should avoid, or qualify preliminary discussions with a single Canadian supplier when other Canadian suppliers of the same equipment also exist and where eventually tenders are likely to be called.

Example: From the outset, the Ford Motor Co. of India negotiated with the Bombay State Road Transport Corporation long before the project was approved, to the point where it was assumed that Ford would be the suppliers. Eventually, it became necessary to call tenders from the three largest Canadian automotive concerns and, although Ford were the successful tenderers, there might have been some difficulties with the Company if the results of the tenders had been different.

10. We should avoid projects where doubt exists that Canadian equipment will be utilized within a reasonable lime after delivery.

Example: Recently, the new Chairman of the Bombay State Road Transport Corporation had in mind withholding acceptance of the Canadian vehicles for some months until the nationalization issue had been solved. I think it is highly desirable that aid should not be stored, both because of the uneconomic features of such equipment not being put to use and because of the rapid deterioration of equipment in this part of the world when left unattended.

11. We should avoid projects which in part rely on other equipment not available in Canada or clarify in advance if offshore purchases will or will not be considered.

Example: The Bombay State Road Transport Corporation insisted on diesel engines for the Canadian vehicles and such engines are not produced in Canada. Many weeks' delay resulted on the insistence of the Bombay State Road Transport Corporation for diesel engines before it was decided to use Canadian funds to purchase Perkins diesels from the United Kingdom.

12. We should insist on detailed contracts covering all aspects of our assistance, including the following:

(i) a schedule of deliveries acceptable both to the Canadian manufacturer and the Indian recipients,

(ii) a clause covering the utilization of such equipment in accordance with the principles of the Colombo Plan, including assurance that there will be no delay in putting the equipment to use after it has been received,

(iii) the contract should state specifically the equipment being provided and which Government is responsible for ancillary equipment,

(iv) the contract should clearly specify the Government responsible for freight, assembly charges, customs duties, packing, clearance etc,

(v) a clause should be included providing for guarantees by the responsible government that the equipment will be properly maintained and serviced,

(vi) a draft copy of the contract should be submitted to the High Commissioner for suggestions based on local knowledge of peculiar conditions which may exist.

Example: The terms of the contract for the provision of vehicles to the Bombay State Road Transport Corporation are not known but all of the above points have arisen in one form or another long after the project was approved.

13. It is also suggested that the Government of India should be persuaded to give a list of suggested projects early in each fiscal year, in order that we can investigate and report detailed background information which will simplify the selection of the appropriate project or projects on which our funds should be spent.

14. A greater flow of information from Ottawa and speedier replies would be of assistance to all of us in India. During our first year of Colombo Plan, our activities have been on a purely ad hoc basis. A speedy and efficient system of co-ordination and co-operation between the two departments involved in Ottawa and the two offices in India through the proper channels of communication would seem to be indicated.

BRUCE I. RANKIN