India and the US will announce a contract during a meeting between US President Barack Obama and Prime Minister Manmohan Singh on Friday that will restart the long-stalled civilian nuclear cooperation between the two countries. It will be a pre-early works agreement between the Nuclear Power Corporation of India Ltd (NPCIL) and the Westinghouse Electric Company.
India would contract Westinghouse for preliminary works, for example, authorising the sharing of confidential information. Though a small step, it will be the single most important outcome of Singh’s visit
Value of the contract
The value of the pre-early works contract is estimated at $15 million. Indian officials say the proposed deal would be the first time money is committed to a commercial US N-supplier since Singh staked his career on a civil N-pact with the US in 2008. But no tangible products are involved and it does not mean the final contract is certain
The 2008 deal
Exempted India from an international sanctions regime that disallowed India from importing fuel or civilian nuclear technology unless it gave up its nuclear weapons. The US persuaded the international community to end this policy. Though never officially promised, Washington expected India would buy three or four US reactors as a partial reward
Why is the N-liability provision a problem?
In 2010, Parliament passed the Civil Liability for Nuclear Damage Act. In a break from international norm, the law says not only the reactor operator but also component suppliers would face unlimited legal liability in case of an accident.
US reactors are sold by private firms who said this sort of suppliers’ liability would make the cost of their reactors too expensive. In November 2011, India announced new rules that cap the liability on suppliers, both foreign and domestic, to Rs 1,500 crore
Why are nuclear suppliers unhappy?
The global norm is for the reactor operator to be liable to compensate victims in case of an accident. If a component supplier is at fault, the operator can sue the supplier but this would be a different track
In India, however, the reactor operator is the state-owned NPCIL, so all the liability in case of an accident would devolve on the Indian government. In theory, NPCIL could afterwards sue a foreign or domestic component supplier if they are at fault
Indian domestic nuclear component makers have also complained about the liability. France, Russia, Japan and other reactor making countries have asked India to change its law on the grounds the insurance cost would be prohibitive
India has not been able to buy a single foreign reactor under the new liability law. All reactors are made of thousands of components made by different firms around the world, so if one key supplier refuses to accept the liability the entire reactor sale is stalled
What Westinghouse says
After US secretary of state John Kerry raised the issue on a trip to India in June, the company said it expected the deal to be finalised in September. In case of the Westinghouse pact, however, the controversial question of liability will be dealt with later as it is a preliminary deal which does not involve putting in place N-equipment.
Westinghouse, which is Japanese owned, would probably also have to wait for the pending Indo-Japanese civilian nuclear deal
Controversy ahead of PM’s visit
On September 25, the cabinet committee on security reportedly cleared changes in the Civil Nuclear Suppliers Liability Clause. The changes say NPCIL can decide whether it wishes to demand the right to recourse against a supplier, making it optional rather than mandatory. The agreement will allow two sides to begin negotiations taking into account all opposition to the clause from the US. The exact same change was extended to Russian reactors installed in Kudankulum
What the PM says
The PM has said this change in the clause does not give any special exemption to the US and does not undermine the Act