The highlight of US President Barack Obama’s visit last week was meant to be the formalisation of the civilian nuclear deal. Diplomats from both sides had met for long hours in London before Mr Obama’s arrival in Delhi to reach an agreement on the deal that has proved problematic for both sides. After the signing of the deal between India and the US in 2008, Parliament had, after a long debate, passed a law in 2010 on the liability of the nuclear plant operator and equipment suppliers. This was not acceptable to the US and the London negotiation was to sort out the differences. The result was “a done deal” according the former foreign secretary Sujatha Singh, but “a work in progress” for nuclear industry suppliers.
The sticking point is the extent of liability. India has, in order to meet US concerns, agreed to meet the entire Rs 1,500 crore of the liability envisaged: Rs 750 crore by a consortium of five public sector insurance companies and the rest by the Indian government. While this Rs 1,500 crore might be sufficient for a moderate disaster, it is nowhere near the cost of meeting major disasters.
After the 1984 Bhopal gas tragedy, which killed tens of thousands of the city’s residents, the Indian government had demanded $3.3 billion in damages but settled for $470 million. The clean up in the US of the Three Mile Island nuclear mishap cost roughly $1 billion, while the full costs of the 1986 Chernobyl disaster may work out to be over $100 billion. In the 2011 Fukushima nuclear disaster in Japan, the damage is estimated to be $105 billion.
In the law as passed by the Indian Parliament, some clauses allow for claiming greater damages. Under the Civil Liability for Nuclear Damage Act, 2010, Section 17b allows the plant operator to claim compensation from equipment suppliers if it can be shown that the accident happened because of defects in the equipment supplied. Most unacceptable for foreign companies such as Areva, Westinghouse or General Electric is Section 46 of the Act, which would make them liable to the law of Tort in India with no limit to the liability.
This is counter to the Convention on Supplementary Compensation for Nuclear Damages, an international law that effectively indemnifies suppliers from such a liability. Much as the Narendra Modi government would like to satisfy the US and corporates, it cannot work its way around the law unless it’s amended by Parliament. Clarity can only be achieved by long and expensive litigation, which is why nuclear companies are reluctant to begin investment.
After the Obama visit, the conservative Wall Street Journal commented that the Indian law “left US power-plant suppliers vulnerable to excessive criminal and civil penalties in the event of an accident. Indian concerns stemmed from the 1984 Bhopal catastrophe... But placing liability on foreign suppliers rather than local plant operators would effectively bar firms such as General Electric and Westinghouse from the Indian market... So it may be a while before any foreign firm breaks ground on a new Indian power plant.”
The reluctance of foreign nuclear firms to come to India is not a loss to the country. Nuclear energy is far more expensive than conventional sources. Plant construction typically takes a decade or more and, despite being around for half a century, needs state support not only in India but worldwide. For instance, the cost of the controversial, yet-to-be-built units 3 and 4 of Kudankulam nuclear power project will cost around '40,000 crore for 2,000 MW power capacity or Rs 20 core per MW. This is around four times the cost of a coal plant and would mean either charging consumers excessively for electricity or making up the difference by huge subsidies.
French company Areva, which is planning to build six power plants in Jaitapur, coastal Maharashtra, was offered Rs 6.50 per unit for power (twice the normal rate for coal based plants) but wants more. Going by the price at which it is building nuclear power plants in France and Finland, the electricity would be an unaffordable '9 per unit, a rate that could bankrupt Maharashtra.
Indian nuclear plants are not so expensive and if we have to include nuclear in our energy mix it is better to stick to tested local designs. However, in over 40 years we have been able to install just 4,700 MW of nuclear power capacity, less than the wind generation capacity put up in a year. The Delhi-based Coalition for Nuclear Disarmament and Peace, in a statement on its website, maintains, “An insurance pool, backed by public sector companies, so that any potential American liability can be redirected back to Indian taxpayers” where the Indian people could end up “being responsible for mistakes made by a multinational corporation”.
It goes on to add that the Indian government has agreed to purchase untested design reactors from Westinghouse and General Electric while “independent estimates suggest that the cost of electricity from these reactors may exceed Rs 15 per unit.” So we do not really need the very expensive foreign reactors, especially since our own nuclear power potential is maturing. The 2008 nuclear deal was thus not about getting nuclear power to cover our power deficit or replacing dirty coal. It basically gave legitimacy to India making nuclear weapons and gave us membership to the nuclear club. One reason for the US to do that may have been to develop India into a potential counterweight to China.
The Americans were also hoping that we would follow their lead in foreign policy and the two big and diverse democracies could move towards being allies. This was the main reason for the left being against the handshake. While George Bush was President, India changed its policy towards an old civilisational friend like Iran. Mr Obama’s charm and bonhomie with Mr Modi, the working together on defence and the joint naval exercise, greater trade and investment, all point to a coming together of ways.
The writer is a Mumbai-based freelance journalist
