India-US Nuclear Deal: Nature of Breakthrough and Implications

India-US Nuclear Deal: Nature of Breakthrough and Implications

Q. “Is the India-US nuclear deal a real breakthrough?” Analyse and explain.

A. Civil Nuclear Deal: Extent to Which It is a Breakthrough

About the Civil Nuclear Deal Breakthrough

One tier of the pool will cater to operators while tiers 2 and 3 are meant for same suppliers largely insulated from any liability; pool constituted of government and state owned insurers; nominal premium to the insurance pool built into the cost of supplies

1. Reading of government law problematic

2. Issues concern every Indian including consumers from the point of view of energy use and taxation as well as victims of nuclear disasters/accidents

3. Breakthrough understanding addresses concerns several key issues such as taxation, energy consumption

4. Special concessions given to the US; US administration led by Bush proved instrumental in providing more options for the nuclear energy programme

5. Supplier pays nothing at all and the deal ends up billing the customers multiple times; breakthrough comes at costly price

6. Demand for more favourable terms by US companies justified; however, has led it to not being much of a breakthrough

7. Key to understanding the deal is to assess the liability and cost

8. Governments have negotiated the minimisation of liability to the supplier(whether US/foreign/India)

9. Civil Liability for Nuclear Damage Act 2010 capped 300 million Special Drawing Rights of around USD 420 million or INR 2610 crore; current deal has different recommendations

10. Only eases the concerns of the suppliers, not concerned Indian consumers

11. Nuclear accidents another important point; March 2011, tsunami off the coast of Japan led to meltdown of the Fukushima nuclear reactor plant

12. Supplier is also responsible; 2011 US government’s joint investigation team on the British Petroleum Deepwater Horizon oil spill found the supplier guilty as well; landmark case where supplier also paid damages

13. CLND Act 2010; proposed cap has to be revised to higher figure than USD 420 million and the Act was more stringent

14. Fault of the supplier difficult to detect in the current nuclear deal breakthrough

15. MEA aimed at easing concerns of suppliers alone;

16. Many answers missing; Certain questions important:

• Law permits yet does not require operator for ensuring liability of supplier for a nuclear reactor or part in the contract
• Supplier can be sued for damage only if provided for in contract in writing
• Supplier obligated under circumstances for signing liability in a contract which is not mandatory as per the government

17. State run operator Nuclear Power Corporation of India Ltd would be concerned with this clause; basic concerns not addressed

18. Further implications of nuclear deal unclear; question of what will occur in case there is privatisation of the nuclear industry; operator no longer a state owned entity

19. MEA has removed the right of recourse of the victim to sue suppliers; this can be a real deterrent in case the supplier is directly implicated

20. Conformity to International Convention on Supplementary Compensation for Nuclear Damage/CSC 1997 not in India’s interests

21.Cost to the Indian consumer; nuclear insurance pool for INR 1,500 crore minimally required to be established by law.

22. International CSC fund to bear residual damages while the supplier will just pay a small premium to the insurance pool

23. Long list of payments to be made by the Indian consumer/taxpayer:

• Land allotted to the nuclear reactor
• Building and operationalising the reactor
• Insurance pool running by state owned companies
• Cost of half the pool provided by the Central government
• Price of electricity per unit

24. Damages disbursed by insurance fund in the event of an accident and legal costs for suing suppliers also taken into account as being billed out of the customer’s pocket

B. Implications

1. Current scenario:

• By 2035, India’s projected energy demand will rise by 132 percent and India will surpass China as the biggest energy consumer across the globe

• Nuclear energy with minimal carbon content and centralised land requirement an important part of the energy mix.

• Trebling of the target to 63,000 MW of nuclear energy by the year 2032; greater than 14 times the amount produced today

2. Two Key Issues:

• Nuclear accident liability
• Administrative arrangements for governing bilateral nuclear cooperation agreement
• US unilaterally terminated accord following detonation of a nuclear device in 1974; present deal only after American concerns over liability legislation addressed

3. US and India locked in negotiations still; IAEA safeguards guarantee on imported materials are used for peaceful purposes only

4. The nuclear accident liability risks and bar on suing for damages can create a situation such as the 1984 gas leak from American owned company at Bhopal where damages have not yet been awarded to kin of deceased victims

5. Japan’s dual liability laws indemnify suppliers and ensure the liability of plant operators; US companies can go scot-free in the event of an accident as far as Indian stand is concerned

6. Memorandum of law with no legislative standing can lead to reinterpretation challenged in Indian courts; companies in the US have been advised to assess their risks regarding whether to enter the Indian nuclear setting

7. Hyde Act enacted in 2006; provisions of act to mandate the nuclear deal recently

8. India will establish a data sharing and material accounting mechanism with the US

US House Foreign Affairs Committee chairman has mentioned the arrangement is less than satisfactory

• Complex legal, pricing and other issues
• Deal’s commercialisation not imminent

9. India has heavily subsidised electricity from the plants; Increase in maintenance issues because complicated foreign technologies from US, France and Russia being used

10. On the plus side, entry into The Nuclear Suppliers Group, Missile Technology Control Regime, Australia Group and Wassenaar Arrangement

11. US side’s refusal to accept the 6 joint high technology projects proposed by India a setback

12. New Delhi asked to sign foundational agreements on military logistics and communications interoperability; this is in contradiction to level playing field sought by India

13. India continues to place nuclear deal at the core of the relationship with the US; however, breakthroughs on these deals more a question of giving in

14. Also creation of US jobs through civil nuclear deal, not Indian jobs

15. Deal also has negative repercussions on the Make in India initiative

16. US Japanese companies will sign commercial contracts with Nuclear Power Corporation of India and GE Hitachi will be reviewing the governmental agreement, but no deals signed yet

Conclusion

India and the US will be working together to resolve the issues surrounding the deal. New Delhi needs to work to ensure the deal has more payoffs and rewards than drawbacks. The Indian taxpayer has the right to know what he or she is paying for and disclosure comes at a heavy price. The deal is now subject to the scrutiny of the media and analysts who view this as less of a breakthrough. Only if the US companies choose to take India up will the civil nuclear deal in the nation really be a breakthrough.