Obama’s visit may kickstart commercial nuclear power in India

A landmark agreement on commercial nuclear power was signed between India and the US during the recently concluded visit of US President Barack Obama. The agreement tied up the loose ends that had emerged after the original agreement signed by President Bush during his visit to the country.

For long, India had practically stayed out of commercial nuclear plants since it had refused to sign the nuclear non-proliferation treaty and conducted two nuclear tests. It had tried to build an indigenous industry and developed reactors based on the CANDU pressurized heavy water design. But long delays in project execution and lack of access to fuel supply – a consequence of the isolation that was forced on India – have ensured that nuclear power accounts for less than 3% of total power supply.

Soon after the Bush agreement, ambitious plans were drawn up to ramp up capacity to 63 GW from 5 GW by 2032. Massive nuclear installations were envisaged including a 9,900 MW complex in the western state of Maharashtra with French Areva reactors.

But two key problem areas crept up. The US government insisted that it would track all US-supplied nuclear equipment and material. But India was reluctant to accept this condition since it went beyond International Atomic Energy Agency inspections that India had agreed to. The second was that, under pressure from opposition parties, the Indian government passed a nuclear liability law that US suppliers objected to.

Both sides reach agreement

The Indian liability law capped the damages at US $300 million – much less than the $12.6 billion in the US – but allowed individuals and plant operators to sue suppliers in the event of faulty equipment leading to an accident. There was little clarity over whether damages that could be granted from third-party litigation would also come under the cap. 

In global nuclear practice, plant operators -- in this case the state-owned Nuclear Power Corporation of India -- would bear the responsibility for an accident and third-party vendors are indemnified. 

Westinghouse's CEO Danny Roderick was quoted as saying in the media:"The way the current law was written, every person in India can sue you. That's the bigger issue -- to withstand the legal costs of a billion people trying to sue you." 

During Obama’s visit both sides said a deal had been reached. While the US has apparently dropped its insistence on tracking and would be content with IAEA inspections, the Indian side assured that an insurance pool would be created – funded by the Indian government and a state-run insurer – for the liability. A legal memorandum would also be signed assuring that suppliers will not be liable to general tort law claims, which would mean that multiple liability claims will not be entertained. This also meant that all claims litigation after an accident will come under the liability act that limits payout.

The effect of this agreement would be that the insurance that US suppliers would have to take out would be reasonable. The agreement has therefore facilitated the putting up of at least two nuclear power complexes that would be supplied by US firms – one a GE-Hitachi plant in Gujarat and another Toshiba-Westinghouse plant in Andhra Pradesh.