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Tag Archives | nuclear liability

Winning the small nuclear battles

Dr. Singh and Mr. Obama must move forward on nuclear trade when they meet this week.

Some newspapers and political parties would have us believe that the PM is in New York with the express intention of selling India’s soul to America.

They contend that India’s Nuclear Liability Act (NLA), which allows for costs to be imposed on the supplier in the event of a nuclear disaster in India, is about to be sold down the river by the PM in order to remove impediments to the participation of U.S. firms in civil nuclear trade with India.  There was furor when it emerged that the Attorney General had issued an opinion indicating that the Nuclear Power Corporation (NPCIL) had the right to waive the liability provision, if provided for in a contract.

Outraged opposition parties and left-leaning media outlets argued that India was bypassing its own law to please the U.S.  A few observations on the subject:

The language in the NLA appears to be fairly clear on the applicability of supplier liability.  Clause 17 reads:

The operator of the nuclear installation, after paying the compensation for nuclear
damage in accordance with section 6, shall have a right of recourse where-

(a)    such right is expressly provided for in a contract in writing;
(b)    the nuclear incident has resulted as a consequence of an act of supplier or his
employee, which includes supply of equipment or material with patent or latent defects
or sub-standard services;
(c)    the nuclear incident has resulted from the act of commission or omission of
an individual done with the intent to cause nuclear damage.  [THE CIVIL LIABILITY FOR NUCLEAR DAMAGE ACT, 2010]

We’ll leave matters relating to the legal interpretation of the language in the Act to the experts on the subject, but if our admittedly untrained legal interpretation is correct, clause 17(a) does allow for supplier-side liability if “expressly provided for” in a contract between the operator (in most cases, GoI) and the supplier.

If this is indeed true, then the question of “bypassing” Indian law simply doesn’t arise.  The law itself does not make supplier-side liability mandatory.  Further, it the begs question of what the opposition — which was out screaming blue murder this past month — was doing when the bill was being debated in 2010.  Even assuming their very busy schedule of staging walkouts in Parliament got in the way of them expressing an opinion when the bill was being debated, what have they been doing the past two years since its enactment?

The NLA in its current state is simply incompatible with the IAEA Convention on Supplementary Compensation (CSC), which India undertook a commitment to accede to.  Contingent on these incompatibilities, India has signed the CSC but not ratified it, as ratification would require a change in our liability laws.  It is strange then that we appear so eager to be brought into the mainstream of the global framework for civil nuclear commerce and yet not want to be bound by its rules.

The issues pertaining to supplier-side liability are not U.S.-specific.  The truth is that no one is willing to do business with India given the costs imposed by the NLA on suppliers.  The Russians have refused to bring Kudankulam 3 and 4 under the ambit of the NLA.  The French company Areva has also made it clear that it will not be able to move forward, given the language in the NLA. The Canadians have expressed reservations.  Potential Indian suppliers themselves appear to be uneasy with supplier-side liability with FICCI warning that the NLA “threatens to completely undo the government’s efforts to accelerate nuclear power generation…”

The AG’s interpretation that the operator had the ability to contractually invoke or exclude supplier-side liability actually dates back to October 2012, when his legal opinion was provided during negotiations on Kudamkulam with the Russians.  There was not so much as a whimper in the left-leaning media then, but apparently now this interpretation causes a “dilution” in our liability laws to allow the prime minister to carry as a “gift” to the U.S.

The Cold War ended two decades ago, folks.  There is no benefit in India pretending to be more soviet than the Soviet Union in 2013.

Many in India are yet to appreciate the impact the NLA has had on the general mood towards India in DC.  This was about more than just nuclear commerce.  Presidents of the U.S. do not make phone calls to their Chinese counterparts asking them to drop their opposition to a third country’s bid for an NSG waiver merely at the prospect of being able to sell few nuclear reactors.  India would have most likely remained a nuclear paraih were it not for the efforts of the Bush administration.

Since obtaining an NSG waiver, the UPA has bungled like only it can.  Debates on nuclear liability were emotive rather than pragmatic, drawing wrong lessons from the Bhopal tragedy.  While the NLA automatically precluded the possibility of the participation of U.S. companies in civil nuclear commerce with India, companies in Russia and France, which were initially underwritten by their governments, were able to enter into exploratory discussions with India.  With Russia and France no longer willing to abide by the NLA, the prime minister arrives in the U.S. attempting to salvage a relationship and an economy.

Realistically, neither the U.S. nor India have each other on their list of top priorities at the moment. The Obama administration is faced with a precarious situation in Syria and is battling opposition on healthcare reform and budget disputes.  Meanwhile, with India heading to polls in May 2014, the UPA is effectively in a holding pattern with very little political capital at its disposal for brave new ideas.

Under the circumstances, if a pre-early works agreement can indeed be concluded between NPCIL and Westinghouse, it might help arrest the doom and gloom and allow both sides to reevaluate positions sometime next year.  This is about as much as we can hope for when Dr. Singh and Mr. Obama meet on Friday.

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On Indo-US ties

India needs to do its share of heavy-lifting too.

News trickled in yesterday that New Delhi shorlisted two European fighter aircraft — Dassault’s Rafale and Eurofighter’s Typhoon as prospective candidates for the highly publicized $10 billion Medium Multi Role Combat Aircraft (MMRA) competition.  My Takshashila colleagues Nitin Pai and Dhruva Jaishankar have two excellent posts on India’s MMCRA decision.  Significantly, this decision meant the downlisting of two American firms competing for the MMRCA contract — Boeing’s F/A-18 and Lockheed’s F-16.

It is not everyday that countries sign $10 billion contracts for fighter aircraft.  The sheer scale, value and nature of the MMRCA competition meant that geo-strategic considerations ought to have outweighed purely technical determinants.  And while very valid concerns about U.S. fine-print have been raised, India has faced similar difficulties with less transparent suppliers, and that too, after signing substantial contracts (lest we forget the small matter about us having to pay $3 billion for an antiquated ship that we were initially supposed to receive for free).  The truth is that India’s severely shackled defense industry necessitates entering into contracts for arms and equipment with foreign suppliers under conditions not entirely ideal.  But deriving benefits from domestic defense industry liberalization — if and when this happens — will take several years.  How does India fulfill its defense requirements in the interim?

U.S. ambassador to India Timothy Roemer was quoted as saying that he was “deeply disappointed” with the outcome.   The downlisting of Boeing and Lockheed is but the latest evidence of ties between the world’s two largest democracies being somewhat adrift after Mr. Obama’s visit to India last year.

The civil nuclear deal between India and the U.S. was meant to be the cornerstone of a new age of Indo-U.S. ties, leaving behind decades of mutual mistrust, lecturing and moral posturing.  The deal offered benefits to both India and the U.S. — for India, it meant international recognition as a de facto nuclear power, and for the U.S. it meant nuclear commerce with an emerging economy. It took the U.S. exercising its political clout to see that a waver based on Indian exceptionalism was granted at the NSG, which also required a last-minute call by George W. Bush to Hu Jintao to prevent China from stonewalling the vote.

However, today, U.S. firms are effectively non-participants in nuclear trade with India because of supplier liability imposed by India’s Nuclear Liability Bill.  Globally, suppliers are unable to obtain insurance coverage for nuclear trade.  Both Russian and French firms compete in India’ s nuclear market because they are essentially underwritten by their respective governments.  And even then, the Russians have apparently made it clear to New Delhi that nuclear commerce with India is unsustainable in the long run under such circumstances.

Today India aspires for a permanent seat at the United Nations Security Council; but reforming the UNSC remains a distant dream. Even so, during Mr. Obama’s visit last year, India joined a select group of nations whose candidature the U.S. endorses.  In its current stint as a non-permanent member of the UNSC, India must make its voice heard and break from a tradition that encourages prevarication and moral posturing.  As I pointed out in a previous blogpost, it’s no use saying India deserves a permanent seat at the UNSC because it represents 1/6th of humanity, if that 1/6th of humanity seldom expresses an opinion.

Undoubtedly, there are bound to be differences in opinion between India and the U.S.  Indeed, it is easy to focus on contentious areas (and there are several) — David Headley, climate change, Pakistan, Iran,  Burma, to name a few.  We need not agree on every aspect of global affairs, but as two large and pluralistic democracies, we share common values and interests, and ought to build our relationship on these shared ideals.  And while it is important not to put undue focus on transactional aspects of our strategic partnership with the U.S., the MMRCA deal will have an impact on the trajectory of this relationship.  And this we knew well before a decision on the shortlist was made.  Indeed, Ambassador Roemer’s resignation hours after India’s announcement of the MMRCA shortlist is probably not a coincidence.

It is certainly conceivable that some of the momentum towards expanding this partnership will be tempered.  Worse, when considered alongside the Nuclear Liability Bill, U.S. companies might soon conclude that the attractiveness of the Indian market is significantly less than the bandwidth they dedicate to it.  After all, interest in India cannot be sustained merely by the “promise” of the Indian market, if none of those promises are materialized.  We have always been eager to deliver our litany of demands to the U.S. — from Afghanistan, to pressuring Pakistan on terror.  But how much are we willing to give in return?  We need to ask ourselves if India is doing its share of the heavy-lifting in  this bilateral relationship.

 

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