Bringing the Indo-US nuclear deal into commercial life was seen by both Narendra Modi and Barack Obama as essential. It was not because of the potential billions of dollars in contracts involved but because the deal’s last mile problems were beginning to define what they both saw as a much larger Indo-US relationship.
Modi, sources said, drove his system hard to come to find a solution to the most nagging problem: satisfying the concerns of reactor component makers that they would be landed with unlimited and uninsurable liability if they supplied even a single part to an Indian reactor.
Modi was also taking a closer look at nuclear power as it has become increasingly clear that his ambitious renewable energy plans and international climate change commitments will not be possible without a sizeable nuclear component. He noticeably clubbed nuclear power with climate change during his joint press conference.
Given the BJP’s lack of control of the Rajya Sabha and the fact the BJP had supported the original liability legislation, any solution had to avoid going back to Parliament. Senior officials had told India’s domestic nuclear component industry, which has the same problems with the liability law as their US counterparts, that new legislation could not be even considered until 2016.
The idea of an Indian government-backed insurance pool providing the coverage for the nuclear component suppliers had been in the works for three years. Reportedly the lead firm for the pool, General Insurance Corporation, had been reluctant.
The other issue was whether the insurance pool would satisfy the key US nuclear companies.
The second problem was left to Obama.
India was clear that the nuclear non-proliferation bureaucrats in the US state and energy departments were making an unreasonable demand by insisting on “flagging” the different streams of fissile material being used by Indian reactors. The costs for such a complex administering process would have been prohibitive.
Other Western countries like Canada had been satisfied with a safeguard mechanism that merely monitored the fissile material flow in its entirety. New Delhi was infuriated when, in negotiations with Japan and Australia for a similar agreement, their counterparts from these two countries said they could not go forward because of US objections. US diplomats deny this claim. Obama, after hearing about the difficulties, ordered his negotiators to accept a Canada style agreement.
The story is not yet complete.
The administering agreement will open the door to a similar deal with Australia and possibly one with Japan.
However, GE, Westinghouse and a plethora of small component makers still await the final shape of the insurance pool before deciding whether they should take the plunge into the Indian market. This also holds true for Indian domestic component makers, all of whom have stopped selling spares and parts to India’s existing nuclear reactors.