442. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
SUBJECT
- Next Step on Indian Food
We can now consider releasing some of the 3 million tons offered in your food message and endorsed by the Joint Congressional Resolution. The Consortium has accepted food aid as an integral part of its work and has incorporated food targets in its overall economic goals. We have firm matching food-related aid for $97.6 million—about half of the $190 million target. Therefore, Secretary Freeman and Bill Gaud recommend (Tab A)2 releasing 1.5 million tons costing about $100 million (375,000 tons of that in sorghum) plus $12 million in vegetable oil.
Our main debate has been over whether to release all three million tons now. Secretary Freeman earlier recommended (Tab C)3 that we go ahead with the whole amount in order to boost our domestic market and take some of the steam out of farmers’ criticism that the Administration deliberately increased wheat acreage last year to drive prices down. The fact is that excellent crops in Canada and elsewhere have undercut prices, but Freeman has had a hard time selling that to the farmers. However, he agrees that we should go with only half that amount now provided we release the rest early this summer.
[Page 855]We have good prospect of getting pretty firm matching aid for the rest of the 3 million tons by the end of June. Because food is not available for this purpose, we have devised new ways of breaking loose special financial aid that the Indians can use in buying food. These are frankly pioneering ventures in the Consortium, and we can measure their success only by seeing whether they actually make it possible for India to buy additional food. We understand that the Indians are already placing orders for 745,000 tons of grain and plan to spend another $50 million as soon as some of this financial aid is firm. But we will have a clearer idea when the Consortium working group meets again in June to pin down final arrangements for debt relief and for freeing other pledged money for food purchases.
I know this second half of our matching effort may look a bit fuzzy to you at this stage. However, after reviewing the figures (see Schultze’s memo attached),4 I regard it as an honest effort to achieve matching aid that is truly additional to regular economic aid. We’re still in mid-stream, so I would not mislead you by saying that our job is done. But this is a sound effort in which I think you can have faith.
Arrival figures definitely dipped between January and May but will pick up again in June.
- January—685,900
- February—821,000
- March—654,000
- April—678,000
- May—608,000
- June—980,000
- July—523,000
Releasing 1.5 million tons now on top of expected Indian purchases should keep the Indian ports full for at least another three months and give us time after the June Consortium meeting to assess further matching, Indian purchases and best timing for our final release.
Meanwhile, we are approaching the peak of the famine in Bihar. State, Agriculture and AID will shortly recommend a new CARE disaster program of about $50 million. I have insisted on a careful study which will not be along for several days. However, I wanted you to be aware of that additional proposal as you make this decision.
The other recommendation in this package is to authorize $50 million program loan (Tab B)5 as the first slice of our own economic aid. India’s fiscal year began 1 April and the Consortium pledging season will not take place until October. One of our objectives at the April meeting was to encourage as much early pledging as possible. Before that meeting, you authorized our offering this $50 million provided [Page 856] the Consortium meet all the targets it set for itself then. Because the food matching and debt relief questions are still pending, we have not actually met those targets. However, Gaud feels progress was good enough that holding off on this loan will not substantially increase our leverage. On the other hand, no one feels under great pressure to rush it through now. Gene’s feeling is that everybody has done a good job, that we want India to get moving and that we should let this go now. On balance, I recommend approving.
I suggest you use Charlie Schultze’s detailed rundown (attached) as your decision document.