236. Letter From the President’s Special Assistant (Randall) to the Under Secretary of State (Dillon)1

Dear Douglas: I have been following with great interest the cables from New Delhi in which the Country Team is pressing for the establishment of a fourth steel plant in India, with capital to be pro-vided by our Government.2

I make bold to offer the following comments:

First of all, it is beyond the realm of possibility in my opinion that any American steel company would undertake to build a plant in India at this time with private capital. That just is not in the cards, and no time should be wasted in pursuing it further.

Nor is there any possibility in the idea that the American steel industry as a collective group would build such a plant. The antitrust laws would forbid it if there were no other reasons, and there are many.

But I see two very real possibilities by which such a loan could be made and still preserve the concept of private enterprise in which we are all so much interested.

First, I propose that the plant be built by the Government of India on a loan from our Government, but on the condition that they offer it to individual American steel companies for operation under lease and on a profit-sharing basis. I think there is a good chance that the Kaiser Steel Company might take it on. They know India because of their construction work at Tata, and their management is world-minded.

I think it is also conceivable that it might be undertaken by ARMCO International, who have an existing world-wide consulting organization.

If those efforts fail, then the loan might be made on condition that the Government of India announce publicly its intention to return the plant to private industry as soon as the general condition of their economy permits. It has already been demonstrated in Great Britain that a steel plant which has been nationalized can successfully be disposed of to private interests by the Government, once it is in successful and profitable operation.

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I have no special knowledge of the facts, but I am impressed by the arguments in the cables that India does require additional steel capacity, and I am also unhappy at the very favorable impact which has been made on Indian public opinion by the building of the Russian steel mill.

If there is anything at all that I can do to help in the consideration of this matter, I am at your service.3

Sincerely yours,

  1. Source: Department of State, Central Files, 891.331/7–159. Secret.
  2. In telegram 3225 from New Delhi, June 19, the Country Team stated that it believed the present stage in India’s planning regarding its steel capacity offered an “excellent opportunity to US to contribute to Indian industrial development in effective way and to influence course of that development.” (Ibid., 891.00–Five Year/6–1959)
  3. In a letter to Dillon, dated July 2, Frederick H. Mueller, Acting Secretary of Commerce, expressed his concern with the recommendations of the Embassy in New Delhi regarding U.S. support for a fourth Indian steel mill: “I feel sure that private industry in this country would not look with favor on financing the socialization of industry in these uncommitted nations, nor should we use taxpayers’ money for this purpose. Certainly before any steps are taken in this direction, even to a very limited degree, it should have the most thorough and searching determination on the part of all interested agencies of the government.” (Ibid., 891.331/7–259)

    Dillon responded to Randall’s letter on July 29, expressing his agreement with Randall that the Kaiser idea should be fully explored. He also noted that the question of U.S. aid to public sector projects in other countries was expected to arise during an NSC meeting scheduled for August 6. (Ibid., 891.33/7–2059) For a memorandum of the discussion at that meeting, see Document 4.