Saturday, February 16, 2008

small. it's the new big.

Poor countries are getting rich, gas costs are rising and our planet is heating up. The result: a new breed of 21st-century cars that are cooler, cheaper and more compact than ever.
By Keith Naughton
Updated: 11:39 AM ET Feb 16, 2008

When gas prices shot up last summer, Millie Richardson had had it with her minivan. So the Lawrenceville, New Jersey, mom traded in her Dodge Caravan for a $17,000 Nissan Versa, a subcompact car that gets more than 30 miles per gallon. Richardson, 55, likes spending less at the pump, but she's most excited about how roomy her little car is. "My son is 6 foot 6, and he drove it," she marvels. "So it's small, but it's big—does that make sense?" What makes even more sense to Richardson, though, is this $2,500 car she's heard about that was introduced in India last month: the Tata Nano. Though there are no plans yet to bring it to America, Richardson is ready when they do. "Oh, boy, would I ever love to drive one," she says. "I would look at it as a disposable car. We have so many things in our lives now that are disposable—why not disposable cars? It would be so cheap, you could always afford a new one."

Around the automotive world, small is the new big. Driven by growing earning power in emerging markets, and rising gasoline prices and global-warming concerns in developed countries, small-car sales are hitting high gear. By 2012, forecasters expect consumers around the world to buy a record 38 million small cars annually, up 65 percent from a decade earlier. In Western Europe, the market for microcars—the tiniest runabouts on the road—is projected to rise nearly 50 percent by 2011 from 2004 levels. Even in the United States, land of the large, sales of small cars are expected to grow 25 percent by 2012 to a record 3.4 million, while SUVs and pickup trucks continue to tank. Last year subcompact sales soared 33.7 percent in the United States, driven by hot sellers like the tiny Toyota Yaris and the Mini Cooper. And Daimler had 30,000 orders in hand before it even launched its three-meter-long Smart Fortwo model in the U.S. last month. "This is not a fad," says Smart USA president Dave Schembri. "It's a trend."

But the car generating the most buzz hasn't even hit the road yet: the Nano. A car for the price of a laptop computer is transformational. Before it even goes on sale later this year, the Nano is changing the rules of the road for the auto industry and society itself. Millions of emerging-market commuters can now own four-wheel transportation, creating unheard-of mobility for the masses. But the Nano and its expected rivals will also lead to more traffic congestion, more global warming, more highway fatalities and more demand for oil. As the world approaches 1 billion vehicles on the road, the Nano and its ilk raise a daunting prospect for society: global gridlock. If the rest of the world begins buying cars at the same rate as America, the global parking lot will swell to 5.6 billion vehicles, figures Sean McAlinden of the Center for Auto Research in Ann Arbor, Michigan. "The Nano is the 21st-century equivalent of the Model T," says Global Insight auto analyst John Wolkonowicz. "The Nano will put the Third World on wheels, and that will have far-reaching implications. It's going to affect every citizen of the world."

It's already shaking up the industry. All the major car companies dispatched teams to the New Delhi Motor Show in January to snap photos and build a dossier on the new Nano. The little car from India could lead to an overhaul in the global auto industry, which was always geared to earn big profits from big cars. Now the car czars will have to learn to make a business out of selling lots of little cars that make less money, instead of relying on big rigs to make most of their money. Detroit is going through a wrenching overhaul as it retools its product line to offer more small gas sippers and fewer big guzzlers. General Motors, which last week reported a record $38.7 billion loss for 2007, can't make money at home, but turns a tidy profit in Asia selling smaller cars. "The whole story in the auto industry today is that the profits are shifting to the developing markets," says Renault- Nissan CEO Carlos Ghosn, who is working with the Indian motorcycle maker Bajaj to try to develop a $3,000 car to go against the Nano. "I'm very bullish on the $3,000 car. We're not trying to do it in Japan or Paris; we're asking Bajaj to do it. We don't know how to do a car like this, but for them it's a natural evolution."

Consumers see it as natural, too. A new generation, weaned on mini mobile phones and iPods, equates small with high tech, not cheap. "For the first time in the history of the auto industry, we have a generation that's connected globally," says J. Mays, chief designer for Ford Motor Co., which in 2010 will begin importing its stylish Fiesta subcompact from Europe. "They see an iPod or a Nokia phone or a $1,200 woman's handbag and think, 'Just because it's small doesn't mean it can't be fantastic'."

This is where the West parts company with the Nano. Today's car buyers in developed nations expect small cars to have all the accouterments they enjoyed in their XL rides. The hot-selling Mini Cooper is a prime example: sporty and stylish, it's loaded with luxurious items like a 10-speaker stereo, leather seats and an optional voice-activated navigation system, and it's priced accordingly. The well-appointed new Mini Clubman S starts at $24,600—or roughly the price of 10 Nanos. "People like the Mini Cooper because it's so well designed and well equipped; there's nothing spartan about it," says Mini U.S. chief Jim McDowell. "I don't think American consumers are looking for a car with less safety features and fewer windshield wipers."

Indeed, the Nano, which has only one windshield wiper, has more in common with the bare-bones econo-boxes that baby boomers drove during the '70s energy crisis. The children of the boomers wouldn't know what to make of a car like that. "To Gen Y kids, something without power windows or door locks is not a real car," says Jim Lentz, president of Toyota's U.S. sales arm. "Most wouldn't know what this crank thing in the door does. It's like a rotary phone."

What this new generation does get is small as a way to reduce its carbon car-print. After all, these little runabouts are powered by tiny engines that burn less gasoline and spew fewer greenhouse gases. The irony, though, is that as millions of small cars clog the planet, they'll only add to global warming and increase demand for oil. GM chairman Rick Wagoner recently warned that the world is already consuming 1,000 barrels of oil per second, and demand is on track to rise 70 percent more by 2030. The motorization of emerging economies is driving that demand. By 2015, 100 million households in the developing world will be able to afford cars priced between the Nano and the $6,000 Renault Logan, predicts the Boston Consulting Group. Governments are already grappling with how to put the brakes on runaway energy use. In the United States, George W. Bush just signed legislation that will boost mandatory mileage on new cars to an average of 35mpg by 2020, up from about 25mpg today. In Europe, regulators are looking at requiring cars to reduce emissions of carbon dioxide (the prime global-warming gas) by up to 25 percent by 2012.

But the West can enact all the green-leaning laws it wants. That won't stop the emerging world's yearning for the freedom of the open road. And that growing automotive appetite could create a climate calamity, environmentalists warn. "Even if they are very clean cars, collectively it will lead to emissions that will only add to local pollution," Indian climatologist Rajendra K. Pachauri tells NEWSWEEK. Pachauri, chairman of the Intergovernmental Panel on Climate Change—which shared the Nobel Peace Prize with Al Gore last year—is critical of the climate consequences of the Nano: "Before we unleash this kind of animal on the streets of India, we ought to explore the public-transportation options." To rein in car ownership, Pachauri suggests that drivers pay a carbon toll to gain access to the roads. The Nano, he says, "is clearly a carbon-intensive option. We need to impose a price on that carbon."

Others hope the rise of the small car in emerging economies will accelerate alternative-fuel vehicles elsewhere. "We'll be driving $40,000 electric vehicles or hydrogen-powered cars while people in India and China are using the remaining gasoline," says Wolkonowicz. "This push for alternate-fuel vehicles in the developed world is not coming a moment too soon, because the motorization of the Third World is coming at a very rapid pace."

That came clearly into focus when Indian motor mogul Ratan Tata upstaged the Detroit Auto Show by rolling out his "people's car" in New Delhi on Jan. 10. Introducing his car to the theme from "2001: A Space Odyssey," Tata hyped its "disruptive innovation" as the equivalent of the Wright brothers' first flight. At first glance, the stubby little car doesn't look like much: no radio or air conditioning, a top speed of about 95 kilometers per hour and a motorcycle-like engine. What has captured the world's attention is the Nano's spartan simplicity. There are no tubes in the tires, to save weight and money. To ease assembly, body panels are glued instead of welded. The wheels are hooked onto the body in a fashion that one rival compared to a child's little red wagon. "We look closely at anything we regard as a breakthrough," says GM product-planning VP John Smith, with photos and diagrams of the Nano spread out in his Detroit office. "You can look at these, but I can't let you have them."

Rivals eager to develop their own low-cost small cars find they simply can't look away from the Nano, even as they dismiss it as far too crude for Western tastes. "It's not so much the vehicle itself," says Chrysler trend watcher Steve Bartoli, "it's the thought process that went into it that's more provocative." Until Tata rolled out his new model, nobody believed anyone could produce a $2,500 car. Now they're jumping on the Nano wagon. Chrysler is looking at developing a racy little car called the Dodge Hornet with China's Chery Automobile. GM vice chairman Bob Lutz says his company could engineer a Nano competitor with its Chinese partner Wuling. And GM is already working on a new car that would rival Renault's $6,000 Logan, says Smith. In fact, GM recently canceled plans for a new line of big V-8 engines and is pouring that money into developing small cars. "We're spending a lot of money on the low end of the business," says Smith.

Europeans are following suit. Coming soon is Volkswagen's Up!, a funky four-seater that's about three and a half meters long. Last year, Fiat launched a remake of the classic Cinquecento (a.k.a. the Fiat 500). Peugeot already offers its tiny 107 city car, developed with Toyota, which sells a similar model called the Aygo (as in "I go"). On the high end, BMW is launching its diminutive 1 Series sedan in the United States starting at $29,375, making it the smallest Beemer on U.S. highways. "We are at a crossroads," says consultant Peter Schmidt of Automotive Industry Data in Britain. "An increasing proportion of the car-buying public has discovered a conscience."

One key country hasn't bought into small-is-cool: China. SUV sales rose 51 percent in China last year, big Buicks and VWs are all the rage and small cars go begging. Ratan Tata predicted that an automaker in China would be the first to match the Nano's $2,500 price, but analysts doubt that. "In China, image is more important than function," says China auto analyst Michael Dunne of J.D. Power and Associates. "Nobody wants to be seen on the bottom of the totem pole."

The biggest roadblock facing small cars is fear about safety. Chery's QQ suffered a PR setback when a video circulated on YouTube of a horrific crash in which the tiny car was crushed between two buses and the driver burned to death. A NEWSWEEK REPORTER TEST-drove a Chevy Aveo subcompact in Detroit last week and felt dwarfed by the SUVs. U.S. statistics on highway fatalities show the smallest cars have death rates 2.5 times higher than the biggest cars. In Europe, small cars, which are driven mostly at slower speeds in cities, have lower death rates, but are in more crashes than big cars. "It comes down to physics," says Adrian Lund, president of the Insurance Institute for Highway Safety. "If you're in a smaller vehicle out there, you're at greater risk."

To overcome small-car phobia, automakers are working to burnish their safety bona fides. In every Smart car showroom in the United States, for example, you'll find the car's reinforced steel skeleton on display. Called its "tridion cell," the steel cage protects occupants in a crash. The sales staff also shows prospective buyers violent crash-test videos and talks up the car's four airbags and electronic stability control. "In America," says Smart USA president Schembri, "you have to address this issue."

The more features automakers can stuff into small cars—be they safety, style or stereos—the better for the bottom line. This is the formula Japan and Europe have used to develop a lucrative small-car market. Typically, an automaker earns about a 5 percent profit on a car. That comes to about $125 on a Nano, $1,250 on a Mini Cooper or, better yet, $2,000 or more on a BMW 1 Series convertible. Putting premium-priced mileage misers on the road could help save the planet without bankrupting the world's automakers. The problem comes in convincing drivers in America and China—the world's two largest auto markets—that they should pay more for less. "Space and weight equal value for most buyers" in America and China, says analyst McAlinden. "It's a dollar-per-pound concept."

We may like to think that the recent spike in small-car sales is driven by altruism. But auto execs says it's a pocketbook issue: U.S. gas prices doubled this decade, and Western Europe is now paying about $2 per liter, up nearly 25 cents from just two years ago. "The worst thing that could happen to us now is if gas prices fell back, because that would take the pressure off," says Ford executive chairman Bill Ford Jr. "We've all started down this path now." And there's no turning back. Forecasters predict oil prices, global warming and emerging-market desire for cars will continue to rise. As long as those factors drive demand, small cars will rule the road.
--with Jason Overdorf in New Delhi

Saturday, February 09, 2008

jewels in their crown

Indian investors have pulled a post-colonial table turn, snapping up some of Britain's best brands.
By William Underhill
Updated: 12:02 PM ET Feb 9, 2008

A recent Indian TV commercial for a mouth-freshening chew provides surprising insight into the business climate on the Subcontinent. The scene is modern-day London, and a young Indian tycoon passes a billboard for the East India Company, the giant British trading firm that dominated India's fortunes for almost 200 years. His immediate reaction: buy the company (in hopes of enticing aspirational Indians to buy the product, as well).

If the East India Company was still around, it's likely an Indian firm would be looking into an acquisition. Flush with cash, corporate India is on an investment spree, and Britain, the old colonial master, last year became the favorite target. Indian investment in Britain has more than doubled in the past three years, surpassing the U.K.'s own investment into India. Indians are now the second-biggest investors in London—home to 19 percent of the national economy—topped only by acquisitive Americans. "I don't think that even 20 years ago anyone would have visualized this," says Subir Gokam, chief economist at the Indian ratings agency Crisil. "We'd still have been imagining ourselves as a Third World country subordinate to the U.S., Britain and everyone else."

On a mission to India last month Prime Minister Gordon Brown spoke of a new "partnership of equals," one that the British hope will include freer trade with India, which despite its stellar growth, can still look more protectionist than peers such as China. While the only headline-making British buy in India last year was Vodafone's $11 billion purchase of a controlling stake in the Indian cell-phone outfit Hutchison Essar, Indian businesses have been snapping up a clutch of iconic British brands, including Tetley, Whyte & Mackay whisky, and Corus, a last fragment of British Steel, acquired by Tata last year for $12 billion. For good measure, Tata now looks set to take carmakers Jaguar and Land Rover off the hands of Ford.

Meanwhile, India's superrich flock to buy expat homes in the poshest areas of London. According to estate agent Savills, which staged its first road show in India last year, in 2007 Indian buyers bought more than 10 percent of London properties sold for £4 million or more, topping even the Russians.

The attraction to Britain has little to do with post-colonial revenge. Start with the presence of at least 1.3 million residents of Indian descent, a shared legal system and familiar language. And Britain is unusually open to big acquisitions by foreigners, of all nationalities. Indian-born steel baron Lakshmi Mittal ran into a firestorm of local criticism when he set out to acquire the French steelmaker Arcelor in 2006. In Britain, the Indian purchase of Corus passed almost without comment. "The relationship has never been better," says Alan Rosling, a director of India's multinational Tata Sons: "As an investor from India there are few places as open, as welcoming and as hassle-free for investing as Britain."

And that's the rub. If Britain is open to foreign investors, India remains decidedly cautious. Legal hurdles to foreign investment remain highest in key sectors like financial services or retailing, where British companies are strongest.

Gordon Brown may be trying to encourage better bilateral trade relations with political carrots, such as emphatic support for a permanent seat for India on the U.N. Security Council. But with elections due within the next 15 months, Prime Minister Manmohan Singh is unlikely to push through contentious reforms. "Change will happen very slowly," says Julius Sen, an expert on international trade at the London School of Economics. "There is a perception in India that international investors will just go for the low-hanging fruit." The cliché isn't entirely without merit; while Indian banks maintain a network of low-profit rural branches, it's unlikely a British incomer would. India's micro-stores would likely be driven out of business by Western behemoths.

Indians argue that there has been significant dismantling of trade barriers already. "It's now more a matter of which sectors you can't invest in, rather than which you can," says Mukesh Rajani, who runs the Indian desk of PriceWaterhouseCoopers in London. Andy Scott of the Confederation of British Industry notes that unlike in totalitarian China, "in India you pay the price of democracy," a price that involves concessions to public anxiety over the impact of foreign investment. A robust political system in which leaders have to trouble themselves with election outcomes may be the Raj's last great bequest to India; British business will have to live with the consequences.

--with Jason Overdorf in New Delhi

Saturday, February 02, 2008

walk this way

A pathbreaking tourism iniative in Kumaon

A few years ago, Satri, a village near Binsar in the Uttarakhand foothills of the Himalayas, was dying. Only three families remained, and all the men had gone to nearby towns for work, leaving their mothers and sisters behind. The advent of the Internet meant that even the postman hardly bothered to make the hilly, two-hour hike to Satri from the nearest road. Then, one afternoon, an oddball group trooped over the ridge with a bizarre proposal: Tourists who'd never known life without water and electricity on demand and a shopping mall around the corner would pay good money to rough it out, miles from anywhere, and learn about how the villagers lived. It was, the whole village agreed, a preposterous idea. “It took us around three years to get the villagers to believe in the project. Then they built the guesthouses within a year,” says Himanshu Pande, one of the founders of Village Ways.

When I marched into Satri at the end of a three-day hike through the foothills arranged by Village Ways—the oddballs who cooked up the idea of bringing tourists to Satri and other remote villages—the place was thriving. The men had come back from jobs in nearby towns to work as cooks, guides and porters, and the women, Satri's greatest asset, smiled and joked with an easy, outgoing confidence they've acquired through managing the guesthouse the villagers built here two years ago. Money has rolled in, too. Sher Singh, the local guide who accompanied me and my photographer, was there to report that the village had earned Rs. 72,000 from the tourist trade over the past two months. Neighbouring villages associated with the project, too, had earned upwards of Rs. 60,000.

The reason is simple. The area surrounding Binsar, in the shadow of Nanda Devi, offers spectacular beauty. The pine forest is silent and deep, amid the evergreens rhododendron bloom in a bloodflash of crimson, and on a clear day you can see the majestic snow caps of the high peaks from the crest of nearly every rise. But the hills grow smaller every year. Once sleepy hamlets like Binsar and Bhimtal are now chock-a-block with hotels, guesthouses and restaurants—most of them built, apparently, by blind bricklayers imported from some vast totalitarian state where the cinderblock is considered a work of art. Cars and trucks roar up and down the steep curves without a moment's rest, and garish signs advertising multicuisine restaurants and “ayurvedic” massage assault from all directions. A good rule of thumb: If you can drive to it, it's already been ruined. Satri and other picturesque villages of the area like Kathdhara, Gonap, Risal, and Dalar, which can only be reached on foot due to their location within the Binsar Sanctuary, are therefore the only unspoiled places left.

After waking up to a fine breakfast at the Khali Estate, a quaint, comfortable Raj-era resort that acts as a sort of base camp for Village Ways, Tribhuvan (our photographer) and I set out for our first day of walking. From a sunny spot on the road with a good view of the snowcaps, we dropped quickly down into the dark forest, following the lead of our guide, Sher Singh, a handsome man with a neat moustache. The ground was springy with moisture, but not wet, and there was an impressive silence. A mile or so along, a partridge broke cover and fluttered up beneath our feet, the startling whupwhup of its wings setting my heart going at the same rhythm. It was vigorous walking, mostly downhill, and, not surprisingly, the footing was good. Village Ways spent the better part of a year mapping and building these trails, to make them safe and navigable, of course, but also to create a network of paths that could facilitate tourists of different levels of fitness. “It wasn't easy to make all these different routes,” Sher Singh told me. “But now we can walk from here to the village in one hour or in four hours, depending on the guest.” Naturally, we always took the shortest route.

We stopped at three of the five participating villages, Kathdhara, Gonap and Satri, each one smaller and more pleasant than the last. Coming into Kathdhara, we stopped in the trail above and looked down over the bright green terraces where the farmers were growing wheat, mustard, lentils and spinach in oval steps down the hillside. In another twenty minutes, we'd hiked down to the guesthouse, passing great piles of saffron-colored pine needles, stacked like hay to dry for later use as kindling and bedding for livestock. We ate lunch beside a lemon tree with the Pancha Chulli range before us in the distance, spent a bit of time chatting with the locals, and then we marched on. In Gonap, we built a bonfire out of the football-sized Himalayan pine cones and watched the sunset, then ate a day-laborer's enormous, starchy meal—dal, aloo gobi, aloo tomatr, roti and rice—and sacked out. Frankly, I was exhausted. Either I'm getting old or I'm not as fit as I like to think or the cold air sapped my strength, but there was no shout-singing of Yellow Submarine and no ribald adventurer's tales that night: I was out cold by 8:30. (Note to the energetic: Village life is pretty tame). Don't get me wrong. It was paradise. But I was having a little trouble getting used to it.

The second day proved to be our longest walk—“We were trekking for three hours!” Tribhuvan exclaimed when he flopped down in a doorway at the end of it—and the most rewarding, because it ended in Satri. It's no mystery why Satri is everybody's favorite village. The place only has three families, but it's like a factory for beautiful women, all of whom are constantly smiling and laughing. No lie: These girls make the boy monks in Ladakh seem glum, and even grandma, deeply lined and missing more than a few teeth, looks better than anybody in Bollywood. Apparently, though, whatever it is that makes the women beautiful and happy also makes people crazy (or maybe it's not getting to marry one of the beautiful women?) because most of the houses in the village are empty. Before Village Ways started, bringing not only a source of income but also entertainment and a steady train of news and supplies, the few villagers left here thought they would have to abandon their homes and move to town. Thanks to Pande and his partners at Village Ways, that now looks unlikely to happen.

The key to making the Village Ways project sustainable—in other words, to making sure it remains a going concern without damaging the land or the local community—was to make the villagers themselves the owners of the guesthouses, Dinesh Pande, a local activist who advised Village Ways on the project, told me. Burned once by the state and the forest department when their land was declared part of the Binsar Wildlife Sanctuary, the local people would not have been keen to accept yet another domineering landlord. And the borrow-build-operate model that financed the construction of the guesthouses—Village Ways provided 40 percent of the money with a grant, 60 percent with an interest-free loan, and the villagers themselves did the building--gives them a much deeper commitment to the project than they'd have to a hotelier who simply cut them a paycheck.

The local end of management, too, is collaborative. Every village has a democratically elected Gram Paryatan Samiti (village tourism committee), and one member from each of these committees represents the village in a project-wide decision-making body called the Paryatan Vikas Samiti (tourism development committee), which allocates jobs and makes other essential decisions. The Gram Paryatan Samitis supervised the construction of the five Village Ways guesthouses, which on the advice of their city-bred collaborators, were built by local craftsmen in the traditional style the villagers used for their own houses. Built with stone and mud mortar, the guesthouses have flush toilets and showers, but solar power provides electricity and hot water. Now, the Gram Paryatan Samitis manage the guesthouses' day-to-day operation and finances—including making payments on the 10-year loan from Village Ways. The Gram Paryatan Samitis also administer a village development fund, which receives 20 percent of the guesthouse income and is used to finance projects that will benefit the entire community. Whether or not Village Ways has provided them the villagers welcome the results, I found when I chatted with residents of Kathdhara, Gonap and Satri. "Now, at least 25 percent of the migration out has stopped, and the only people who leave are those who get good jobs,” said 78-year-old Amar Singh, a retired policeman who lives in Gonap. "If we continue to get more tourists," he said, "we might get a motorable road. We might get more development."

For the duration of the day's hike, I wondered whether the villages I was visiting were truly 'sustainable,' and if Gonap was a rural paradise, or a people zoo. Then I walke into Satri, and Kiran, a teenaged village belle, garlanded me with a string of mustard flowers.

Was there a flirtatious sparkle in her eye, I thought? Perhaps I am not so old after all.

And so the fate of the countryside, fragile as it is, slipped easily from my mind. Fleeting, maybe, but this was paradise.

Friday, February 01, 2008

stolen kidneys

Indian investigators suspect as many as 500 illegal transplants have been performed.
By Jason Overdorf
Newsweek Web Exclusive
Updated: 5:41 PM ET Feb 1, 2008

Mohammad Salim Khan, 33, was squatting on a corner where unemployed day laborers congregate, looking for work, in the Uttar Pradesh town of Meerut, when a bearded man offered him a three-month job in Delhi that would pay about $3 a day. Khan jumped at the chance. But when he eventually reached Delhi, the promised job never materialized. Instead, Khan was taken to a house in Gurgaon where two men held him at gunpoint and knocked him out with an injection of sedatives. When he woke up hours later, he had a horrible pain in his abdomen, and a man in a surgical mask was leaning over him. "Your kidney has been removed," the man said. "Don't tell anyone after you leave here. Not your friends or family or relatives or anyone. If you say anything, one of our guys will find you and shoot you."

It sounds like a sci-fi movie or an urban legend. But Indian police, who broke into the house where Khan was being held not long after his surgery, say that organized gangs who steal, or buy, kidneys and other organs for illegal transplant operations are an all-too-common reality here, where some 320 million people survive on less than $1 a day. The authorities believe that this ring—which was allegedly run by a man calling himself Dr. Amit Kumar, though he was not a doctor of medicine—may have performed as many as 500 illegal transplants without being detected over the past eight or nine years. The criminal network apparenlty involved four doctors, five nurses, 20 paramedics, three private hospitals, 10 pathology clinics and five diagnostic centers, police believe, and drew patients from as far afield as the Canada, Greece and the United States. Authorities are trying to talk to U.S. patients who may be involved, saying the patients will not be in trouble and that they are only seeking further information on the doctors involved.

Christened "Dr. Horror" and "Dr. Dracula" by Indian tabloids, the man who allegedly ran the Gurgaon-based racket had been arrested on a similar charge in Mumbai in 1994, but police allege that he jumped bail, changed his name from Dr. Santosh Raut to Dr. Amit Kumar and set up a new operation in Delhi. His Gurgaon clinic was raided by the police in 2000, and police reportedly failed to investigate after television and newspaper exposes alleged that Kumar was performing illegal surgeries. "In the maximum number of these cases, they [the accused] are under trial for many years, and there are very few convictions," said Bhuwen Ribhu, a lawyer and activist who specializes in cases of human trafficking. "It is quite sad. Even when the person is arrested, he gets bail within three or four months and continues as he was doing before." Comparing this case to a 2006 scandal in which police ignored complaints from poor parents, allowing a serial child murderer to go on killing for months, Ribhu adds, "In most of these incidents, I'm sure the police [are] not even registering cases."

The Gurgaon ring was broken because a former victim who had joined the gang as a recruiter approached the police with his story, but a leak allowed Kumar to escape before the police raid, and despite a national and international manhunt he remains at large. So far, police have arrested only one of the four main doctors, as well as a nurse, cook, driver and other minor figures in the gang. However, officials suspect that several private hospitals in Delhi and its suburbs may have known about the illegal transplants—or at least have avoided asking too many questions. "Due to its scale, we believe more members of the Delhi medical fraternity must have been aware of what was going on," Gurgaon police commissioner Mahinder Lal told reporters.

Similar organ-theft rings have been unearthed across the country in the past. But if these estimates can be confirmed by testimony and evidence, this would be the largest illegal-transplant network uncovered to date in India—and even so it may be just a fraction of the cases.

"It is clear that a large number [of transplants] are not being documented within the system, which means that they are being done elsewhere," said Dr. Amit Verma, chief operating officer of a Delhi hospital run by Fortis Healthcare that is one of only a few institutions to use an independent screening committee to evaluate potential donors. "For a country of our size, and for the number of renal failures that we have, we should be doing at least a thousand times the number of transplants that we do officially." Indian surgeons perform 3,000-4,000 legally documented kidney transplants per year, in part because India has strict laws that mandate that organ donors must be close relatives to the recipient.

Those laws help create a huge gap between supply and demand, and illegal transplants go on because the legal system is ill-equipped—and some say unwilling—to deal with the problem. "Most of these cases are never reported," said Manjit Ahlawat, joint commissioner of the Gurgaon police. "The person who wants a kidney benefits, and the person whose kidney has been taken benefits, because he gets a lot of money, so nobody files a complaint." He believes that the three donors that the police found in Gurgaon were likely promised large sums of money—by their desperate standards—and in exchange for their organs. Now, they must claim that they were compelled by force, because otherwise they could be prosecuted as criminals. "If they admit that they did this willingly, they will be arrested, too," Ahlawat said.

Apart from evidence derived from the interrogation of suspects and five foreigners whom the police believe were waiting for transplants and the testimony of Khan and other men whose kidneys were allegedly stolen, the police recovered letters and e-mail messages from 48 foreigners inquiring about transplants from Dr. Kumar's office. According to Gurgaon police, touts canvassed Delhi and other cities to recruit donors, focusing on the poor and unemployed. Some were allegedly asked if they wanted to sell a kidney for $1,000 to $2,500.

Khan, an unemployed laborer who earns about $2 a day when he is lucky enough to find work, says that the offer of a steady job was simply too good to pass up, and even though he was kept waiting for almost two weeks in a house with a couple guys with rifles stationed outside it, he didn't complain because he was well fed and they promised he would be paid for his time. Only when the blood test was administered did he begin to catch on. "I asked why I needed a blood test, and one of the guys pointed his gun at me and told me not to ask pointless questions if I wanted to live," he said, casually leaning against the wall on the balcony outside the isolation ward at Gurgaon Civil Hospital. Lifting up his shirt, he reveals a puckered, 10-inch incision in his side, stitched together with broad exes of black surgical thread. "When I heard that my kidney had been removed, for a long time I was in shock," he reflects. Khan, who supports five children, his mother and two sisters, has no marketable skills, and doctors say that he will no longer be able to perform the backbreaking labor that he's used to doing. "I keep thinking about how I will live now." He says he received no payment for his kidney.

Naseem Mohammad, a 25-year-old laborer from Ahmedabad, in Gujarat, has a similar story. He was waiting for work at a labor market near the Old Delhi Railway Station when a man approached him with an offer for a three-month painting contract. He was taken to a house in Uttar Pradesh for two weeks, where his recruiters told him that they were waiting for a tender to be passed before the work could begin. "I didn't try to run, because I still thought I was going to get the job," he said outside the isolation ward. "Then one day they didn't give me anything to eat. They tested my blood. Then they gave me an injection. I asked them what was in it and why they were giving it to me, and they told me it was for my own good. Then I passed out." When he woke up, his kidney was gone. "I've gone before like this with people for 15-20 days work," he said. "Nothing like this has ever happened. Once I went to Mehrauli with a labor contractor to do road work. I didn't know this will happen. I'm in shock after this. What will I do?" He, too, says he received no money for his stolen organ.

Whether they volunteered and were cheated of their payoff or were drugged and robbed of their kidneys, there is no doubt Khan and Mohammed were victims of an inescapable, suffocating poverty that made them--like millions of others--vulnerable to all kinds of exploitation.

"They were easy prey," said Gurgaon deputy police commissioner Rakesh Arya.