The Bokaro Issue

Capitol Hill tempers heat up rapidly when U.S. foreign aid comes under discussion. And no proposal is likely to generate more warmth than the one to help India build a government-operated steel plant in the town of Bokaro, north of Calcutta.

India already gets the largest single slice of U.S. aid--$775,100,000 in 1962 v. $403,900,000 for second-place Pakistan--and Nehru's socialist government has not been notably grateful. The Bokaro plan calls for a $512 million first loan and another $379 million later; if granted, it would become the biggest single U.S. foreign aid project ever undertaken anywhere.

President Kennedy supports the plan. So, obviously, does his foreign aid administrator, David E. Bell, although he is not yet quite willing to come right out and say so. Last week Bell appeared before the Senate Foreign Relations Committee to testify about the Bokaro project--and he bumped into a buzz saw in Ohio Democrat Frank Lausche.

Grave Doubts. Lausche began by reading to Bell a passage from the overall foreign aid report submitted last March by a presidential advisory committee chaired by Retired General Lucius D. Clay. Plainly referring to the Bokaro project, the Clay committee wrote: "We believe that the U.S. should not aid a foreign government in projects establishing government-owned industrial and commercial enterprises which compete with existing private endeavors . . . Moreover, the observation of countless instances of politically operated, heavily subsidized and carefully protected inefficient state enterprises in less developed countries makes us gravely doubt the value of such undertakings."

Bell's answer began carefully. He noted that final Administration approval of the Bokaro plant was still pending. Said he: "I don't want to prejudge a question which will not come to me for some months. We believe in an economic system that has private as well as public capital invested in productive . . ."

Lausche broke in. "Oh well," he said, "I will not insist on an answer. You put your rules in such flexible language that they cover anything, including giving aid to Communist or socialist governments around the world." Without waiting, Lausche stalked out.

Bell continued with his explanation. A strong India, he said, is certainly in the U.S.'s best interests. To become strong, India must build its industrial potential, and the Bokaro plant is vital to this aim. Bell insisted that Indian government officials and private citizens are almost unanimous in their belief that the Bokaro plant should be government-operated. He had, he said, recently talked to J.R.D. Tata, head of one of India's two private steel mills. Tata told him that private capital was simply not available, either in India or abroad, for investment in the plant.

The Sick Child. Bell made a persuasive case for Bokaro--but the plan remains a difficult pill for Capitol Hill to swallow. Of India's three existing government steel mills, one was built by Great Britain, one by the Soviet Union, and one by West Germany. At all three, construction costs far outran estimates. At the Soviet mill, production costs have been higher than in the private plants. And the West German mill was, until recently, so plagued by mechanical difficulties and labor troubles that it was dubbed "the sick child" of Indian industry. It was with this record in mind that the Clay committee concluded that underdeveloped countries have no right to ask "aid to enterprises which only increase their costs of government and the foreign assistance burden they are asking us to carry."

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