It’s liability law may lock out U.S. firms. Pres. Obama will want a resolution during his November visit.
(update below) Indian pride in its growing role in the Asian nuclear renaissance was highlighted October 10 in a statement by Prithviraj Chavan, the incumbent government's Science & Technology Minister.
Speaking to the Asian Nuclear Prospects conference held near Chennnai, he said the by 2012 and beyond India will have launched work on 12 new nuclear reactors with a 20-year goal of having 60 GWe of electricity from them. The new build is estimated to be worth $150 billion.
India's current new nuclear build includes four reactors being built by the Russians and two more by Areva. The expansion also includes India's commitments to build its own 700 MW indigenous design and longer term goals to build sodium-cooled fast reactors.
No American firms are involved with India's new build due to a restrictive liability law enacted by parliament earlier this year. It assigns liability to suppliers in the event of an accident even after their components have been installed and working properly in new reactors. The Confederation of Indian Industry said the legislation would restrict nuclear growth and deter foreign firms from doing business in the country.
The nuclear liability law is the central issue in an upcoming visit to India by U.S. President Barack Obama. The Indian government is pressed to paste a political fig leaf over the liability issue. American firms are pressuring the U.S. State Department to get India to draft implementing regulations that would shield them from the "suppliers" clauses. The Nuclear Energy Institute (NEI) recently hired an expert on Indian trade issues to bolster its work in this area.
India won't back down on liability law
U.S Secretary of State Hillary Clinton met with Indian Foreign Minister S.M. Krishna (right) at the United Nations in New York on Oct 12 with mixed results. Krishna pushed back on Clinton's diplomatic overture telling the Press Trust of India the government will not water down the provisions of the law.
In fact, for a diplomat, he pushed back rather hard telling Clinton she needs to "understand the reasons" for the bill. Krishna softened the blow by committing India to join an international convention on liability compensation.
What India wants from the U.S.
This is a surprising response given the wide ranging list of things India wants from the U.S. India will be asking President Obama for three things when he shows up in New Delhi the second week of November.
- Remove a long list of "dual-use" technologies from export control restrictions
- Increase pressure on Pakistan to stop support for terrorist groups such as those that attacked Mumbai in Nov 2008
- Support India's quest for a permanent seat on the UN Security Council
The issue of liability for nuclear suppliers plays on this field. An essay published in Newsweek by Sumit Ganguly Oct 11 lays out the reasons why India may be overreaching in pursuit of these goals. He writes that India's foreign policy establishment does not understand the importance of the liability law to relations with the U.S. He says its passage has undermined trust between the two countries.
U.S. firms have pointed reminded Sec. Clinton that the U.S. played a significant role in getting the Nuclear Suppliers Group to lift a three-decade old ban on sales of uranium to India as it is did has not signed the Nuclear Nonproliferation Treaty. In return, India was supposed to open its vast nuclear energy market to U.S. companies. That's not going to happen if the liability law remains in place as is. U.S. interests will see it as a slap in the face for its support of the uranium deal.
India needs nuclear technologies from the US and Japan
The stakes for India are that it needs American nuclear technologies. It can't get everything it needs from the Russians or the French. Even Areva is planning to import some of the components for the first two of six reactors it will build for India. These components include the forgings for pressure vessels from Japan Steel Works.
Westinghouse, which hopes to get 10 Gwe of reactor business from India, has made significant commitments to buy locally, but India's industrial infrastructure has a decade of development in front of it to meet the indigenous nuclear industry's needs. GE-Hitachi has inked several joint manufacturing deals with Indian firms to help them get up to speed including development of a manufacturing center at a proposed new reactor site.
Complicating the role of U.S. firms is that two of them have significant ties to Japan, which is currently in parallel negotiations with India over the liability law. Westinghouse is owned by Toshiba and General Electric has a joint venture with Hitachi.
An Oct 19 report in the Hindu said that Japan is hard over that all bets will be off on civil nuclear cooperation if India tests a nuclear weapon in the future. India is unwilling to give up that option given its hostile relationship with Pakistan, its nuclear-armed neighbor. Japan hinted it might call off the negotiations if the issue cannot be resolved.
U.S. defense deals pending Obama’s visit
Meanwhile, U.S. defense firms are also ramping up pressure on the U.S. government to allow them to sell billions in weapons systems to India to modernize its forces and replace aging Russian supplied equipment. At the top of the list is a $5.8 billion deal for 10 Boeing C-17 transports.
These deals could be impacted by the nuclear liability stand-off. It is a political non-starter for PM Singh's government to have a public appearance of watering down the law. One way out of the impasse is for the implementing regulations of the Indian law to assign supplier liability solely to the Nuclear Power Corporation of India Ltd (NPCIL) which owns and operates the country's civilian commercial reactors.
Two other factors have come up recently which affect the U.S. Indian relationship. The New York Times reported Oct 17 that the FBI knew two years before the Mumbai attacks that an American was involved in planning them. The newspaper was not able to establish that this intelligence was shared with Indian national security forces prior to the attacks which originated in Pakistan.
That news surely diminished the goodwill that was generated two days earlier when the Wall Street Journal reported Oct 15 that Tata Group, an Indian conglomerate, donated $50 million to the Harvard Business School, the largest gift HBS has received from an international donor in its 102 year history.
President Obama's visit is only a few weeks away. He will want to come home with several boxes checked off. They include relaxation of the liability law that will allow entry of U.S. firms to India's nuclear market and a major announcement of U.S. firms getting reactor deals.
As for the defense and UN issues, these will test U.S. Indian relations since "good will" is not a bargaining chip when it comes to the international security interests of the two countries.
(update 2010 10 21)
The Hindu reports Oct 21 that after initially trying to dilute the nuclear liability law at the draft stage to accommodate the concerns of American suppliers, the Manmohan Singh government has told the United States that the Act, as passed by Parliament, is final and that no changes in any of its provisions are possible.
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