Obama's India Visit: What Can India And The US Do About The Civil Nuclear Deal?

NEW DELHI -- On Wednesday, when representatives from India and the United States meet for the third time since the nuclear contact group’s creation last year, officials from both countries would have their task cut out in finding common ground that might generate action out of the civil-nuclear agreement between India and the U.S., which has been in a limbo ever since it was finalized in October 2008.

The nuclear contact group was created to expedite cooperation on the deal after Indian Prime Minister Narendra Modi and U.S. President Barack Obama met in Washington in September last year. And the latest meeting's importance is highlighted by its timing -- just days before Obama begins his second India visit on Sunday.

INDIA-U.S. NUCLEAR DEAL

It was in July 2005 that the framework for a civil-nuclear agreement was first broached between the two countries, in a joint statement between the then Indian Prime Minister Manmohan Singh and former U.S. President George W. Bush. The final agreement was signed in August 2007.

Under the deal, the U.S. offered India full civil nuclear cooperation after the latter agreed to separate its civilian and military nuclear facilities, and open its civilian reactors up to inspections by the International Atomic Energy Agency (IAEA). The deal was hailed as a diplomatic coup of sorts for India, on which the U.S. and most of the rest of the developed world had imposed sanctions after it conducted a series of underground thermonuclear tests in May 1998.

THE LIABILITY QUAGMIRE

Since then, however, the deal has remained largely unfruitful owing primarily to liability clauses imposed by a 2010 Indian legislation that has been a stumbling block in the way of several other countries, including the U.S., looking at selling nuclear reactors to India.

The Indian law, put simply, makes the suppliers directly liable in case of a nuclear accident while globally, the primary liability rests with the operator. If India were to follow global norms, the entire liability in case of an accident would fall upon the Nuclear Power Corporation of India, a government-owned company that operates all the nuclear power plants in the country. Effectively, therefore, the Indian government would be responsible for damages in case of a mishap.

Moreover, another contentious section in the law potentially exposes suppliers to unlimited liability, and getting insurers to cover liability costs might prove nearly impossible, according to The Hindu, a daily newspaper.

“The only nuclear cooperation that India has been able to conclude with any of the countries with whom it has nuclear cooperation agreements is in respect of nuclear fuel,” G. Balachandran, a consulting fellow at the New Delhi-based Institute for Defence Studies and Analysis, said in a paper.

In December, Modi had said that India is considering setting up 10 nuclear reactors with Russian assistance. In June, Russia agreed to the Indian nuclear liability law, albeit reluctantly. At present, with its 21 functional nuclear power plants, India has an installed capacity of 5,780 MW, or less than 3 percent of its total power generation. India has lowered its target of installed nuclear capacity from 63 GW by 2032 to 27.5 GW, as none of the proposed projects have started.

India now wants to form a nuclear insurance pool to cover suppliers of both its existing nuclear plants and the ones that are set up under the several civil nuclear agreements that it has signed. And, while India may not be able to change the law, as it has been passed by its parliament, the insurance pool is reportedly being seen as the most workable way around it.

NUCLEAR SUPPLIERS GROUP

India has also been seeking entry into the 48-member Nuclear Suppliers Group (NSG), which incidentally, was created in the wake of India’s first nuclear test in 1974. In July, India had ratified an additional protocol to its safeguards agreements with the IAEA, and had also said that it would put two additional reactors under the atomic regulator's purview by the end of 2014.

“As a critical step in strengthening global nonproliferation and export control regimes, the President (Obama) and Prime Minister (Modi) committed to continue work towards India’s phased entry into the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement and the Australia Group. The President affirmed that India meets MTCR requirements and is ready for membership in the NSG. He supported India’s early application and eventual membership in all four regimes,” the two countries had said in a joint statement at the end of Modi’s U.S. visit.

And, Modi reportedly wants to follow up on it by pushing Obama to support India on its membership bid at the NSG. Yet, this may prove to be a challenge because misgivings about India’s nuclear program remain.

IHS Jane’s, a think tank that publishes on defense matters, claimed in June that it had found what might be a covert uranium enrichment site near Mysore in southern India.

“This site in India will support new centrifuges that will substantially expand India’s uranium enrichment capacity, most likely to facilitate the construction of an increased number of naval reactors to expand the country’s nuclear submarine fleet, but also, to potentially support the development of thermonuclear weapons,” it said, adding that the facility could become operational in 2015.

Although Indian officials have denied the report, it has fuelled speculation that the country has a covert nuclear program, something that will only make it harder for India to have a shot at the nuclear high-table.