The devil lies within: What can spoil the India-US nuke deal

The India-US nuclear agreement looks well poised to become operational, but not yet. While some of the key political stumbling blocks have been taken care of by the two governments, New Delhi needs to carefully consider many critical issues and overcome a number of hurdles before being able to produce more nuclear energy.

The India-US nuclear agreement looks well poised to become operational, but not yet. While some of the key political stumbling blocks have been taken care of by the two governments, New Delhi needs to carefully consider many critical issues and overcome a number of hurdles before being able to produce more nuclear energy.

First of all, India’s offer to create an insurance pool, to pay for the claims against suppliers arising out of a nuclear accident, clearly runs contrary to the spirit of the Indian liability law, the Civil Liability for Nuclear Damage Act (CLNDA). Whereas the law, as well as the deliberations in Parliament during the passage of the law, demands that the suppliers of the equipment should be liable for the damages that an accident would cause, the government is now proposing to cover any costs involved. As of now there is no clarity on whether or not India will have to fully pay up the insurance premiums. If indeed the government contributes any more than 50% of the premiums to be paid for the insurance pool, it would hike the price of the reactors and consequently the cost per unit of the electricity produced, since the premium paid for the insurance pool will be added to the cost of the reactors.

The second challenge is the absence of an India-Japan civil nuclear agreement. This may prove to be a spoiler in the further implementation of the India-US nuclear deal. A deal with Japan is important not only because it is at the forefront of key nuclear technologies, but more importantly, major US-based firms such as Westinghouse and GE would not be able to sell reactors to India without an India-Japan nuclear agreement given that Hitachi recently bought 40% stake in GE’s international joint venture, and Toshiba fully acquired Westinghouse Electric company in 2008. An India-Japan deal may not be very easy to ink given the Japanese demands such as an Indian commitment on no further nuclear testing, and spent fuel be sent back to Japan for reprocessing, among others. New Delhi’s claim that other alternatives are available is not convincing enough.

The third issue is the sale of enrichment and reprocessing technologies (ENR) to India. While the 2008 Nuclear Supplier Group (NSG) decision allowed its members to sell sensitive nuclear technologies to India, NSG’s 2011 decision to limit the scope of the transfer of nuclear technologies to non-NPT countries has complicated India’s ability to acquire ENR technologies. ENR technologies are important for India to acquire adequate commercial uranium enrichment capacity so as to reduce dependence on advanced nuclear states for the supply of nuclear fuel.

Four, how wise is it for India to massively enhance its reliance on nuclear energy while being outside the cartels that run the international nuclear order? Given that India is not a part of the international strategic cartels such as the NSG and the Missile Technology Control Regime (MTCR), India will continue to have to make backdoor deals in order to engage in nuclear commerce. The foreign secretary’s assurance that India would be given a phased entry into these cartels is not new. But one that has been continuously given for the last seven years without much concrete action.

Finally, the big question is whether the nuclear industry in the West will find it attractive to sell nuclear reactors to Indian operators. Only when the commercial negotiations begin and the operators and suppliers do their own risk-assessments, will we really know how soon we will be able to have more nuclear energy. The devil, clearly, lies in the detail.

Happymon Jacob is assistant professor, School of International Studies, Jawaharlal Nehru University. The views expressed by the author are personal