India’s Nuclear Charade Unravels

Nuclear chickens come home to roost

Brahma Chellaney
Mint, June 29, 2011

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During the more than three-year-long process to finalize the terms of the nuclear deal with the US, the prime minister kept meretriciously reassuring the nation that he would operationalize the deal only after securing a broad political consensus in support. He even pledged: “Once the process is over, I will bring it before Parliament and abide by the House.”

Yet, he completely bypassed Parliament. And instead of any attempt at consensus building, the nation witnessed a polarizing single-mindedness to clinch the deal at any cost.

Now, with several of Singh’s key assurances to the nation falling by the wayside, the nuclear chickens have come home to roost. The Nuclear Suppliers Group’s (NSG’s) new ban on enrichment and reprocessing (ENR) equipment transfers fulfils one of the last remaining conditions of America’s Hyde Act, highlighting the rising costs for India of a deal whose much-trumpeted benefits are likely to remain elusive. India also has ended up with no legally binding fuel-supply guarantee, despite its bitter experience over the US-built Tarapur plant. And it has secured no right to take corrective measures even if the US again unilaterally terminated cooperation, as did in the 1970s.

That the NSG granted India a clean, unrestricted waiver in 2008 is a myth the politically besieged Singh government created to save face in public. In truth, it had signalled to the US earlier that it could live with a conditional waiver as long as the conditions were not embarrassingly conspicuous. Indian diplomacy sought to ensure that prohibitions on nuclear test and ENR transfers remained implicit, or else the PM would stand exposed at home.

In this light, the NSG, amid a tussle between non-proliferation purists and pragmatists in its ranks, arrived at a waiver whose language was politically palatable to New Delhi but whose basic terms meshed with the stipulations in the Hyde Act and some of the purists’ demands. The waiver text incorporated several layers of riders — some explicit and some implicit — to the decision to open civil nuclear trade with India.

While the bar on Indian nuclear testing was imposed by linking it to the NSG Guidelines’ paragraph 16, which deals with the consequences of “an explosion of a nuclear device,” the prohibition on “transfers of sensitive exports” was fashioned by specifying that such transfers will “remain subject to paragraphs 6 and 7 of Guidelines.” Paragraphs 6 and 7 incorporate a presumption of denial of sensitive items. This linkage to the two paragraphs was devised as an interim step until the NSG formalized a ban on ENR and other sensitive sales.

Now last week’s formal ban — which, in effect, singles out India — meshes with the Hyde Act’s bar on the transfer of ENR and heavy-water equipment to India, other than for a multinational or US-supervised facility. It also jibes both with the Hyde Act’s call for a NSG-wide ban and with the US-India 123 Agreement, which excludes ENR and heavy water equipment transfers by saying they “will be subject to the Parties’ respective applicable laws, regulations and license policies.” Even the Indo-French and Indo-Russian civil nuclear agreements do not include ENR and other sensitive transfers in their scope of cooperation.

India, which committed itself to support NSG moves to halt the spread of ENR technologies “to states that do not have them,” has itself become a NSG target. It will, moreover, have to build a costly new internationally safeguarded reprocessing facility without getting the smallest component for it from overseas.

The NSG ban highlights another fundamental reality about India that is also embedded in the Hyde Act, the 123 Agreement and the Safeguards Agreement with the International Atomic Energy Agency: Apart from retaining nuclear facilities in the military realm, India is being treated, for all intents and purposes, as a non-nuclear-weapons state and thus subject to the non-proliferation conditions applicable to such states, but with its non-membership in the Nuclear Non-Proliferation Treaty (NPT) carrying additional penalties.

But the ban’s real effect is to expose New Delhi’s charade that it secured a clean, unconditional NSG waiver. Disturbingly, the government expended greater efforts to pull the wool over the Indian public’s eyes than to stick to Singh’s assurances to the nation.

Consider another telling fact: Although the deal was ratified by the US Congress on October 1, 2008, Singh has yet to make even a statement in Parliament on how its final terms square with his August 17, 2006, assurances to the nation. What can he tell Parliament when the US Congress has removed his government’s last possible fig leaf?

Through the ratification legislation — the US-India Nuclear Cooperation Approval and Non-Proliferation Enhancement Act (NCANEA) — Congress actually busted several myths peddled by New Delhi. First, NCANEA makes explicit that, “Nothing in the [123] Agreement shall be construed to supersede the legal requirements of the Henry J. Hyde Act.” Second, NCANEA stipulates that the US promise of uninterrupted fuel supply is a “political,” not legal, commitment. It cannot be anything else because the 123 Agreement itself confers an open-ended right on the US to suspend or terminate cooperation. And third, the final deal grants America specific rights, but spells out only India’s obligations.

More fundamentally, the deal has come to symbolize the travails of the Singh government — scandals, broken promises, malfeasance, poor public accountability, and the resort to casuistry to camouflage reality. The cash-for-votes scandal in Parliament set the stage for the other scams that have followed.

Brahma Chellaney is professor of strategic studies at the Center for Policy Research in New Delhi.

(c) Mint, 2011.

Bribes for Nuclear Deal

Corrupt means taint the nuclear deal

The new bribery revelations, a rigged process to import reactors and safety-related concerns must lead to the long-blocked scrutiny of the nuclear deal by Parliament.

Brahma Chellaney
The Hindu, March 23, 2011
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The world’s worst nuclear accident since Chernobyl raises troubling questions about India’s plans for a huge expansion of its nuclear power programme through reactor imports. Given its low per-capita energy consumption, India must generate far more electricity to economically advance. So it needs more nuclear-generated power. The real issue thus is safe and cost-competitive nuclear power.

What is disconcerting about India’s plans for massive imports is that they are not part of a well-thought-out strategy but a quid pro quo to the United States, France and Russia for bringing the Indo-U.S. civil nuclear deal to fruition, including through a Nuclear Suppliers Group waiver. For example, while keeping Parliament in the dark, the government faxed a letter to U.S. Undersecretary of State William Burns on September 10, 2008 — just hours before the White House sent the deal to the U.S. Congress for ratification — committing India to import a minimum of 10,000MW of nuclear-generating capacity from the United States. New nuclear plans had to be prepared to accommodate the political commitments already made.

As the WikiLeaks’ revelations published by The Hindu underscore, the U.S. has a big stake in the nuclear deal and went to unusual lengths to drum up support in India and ensure the outcome it desired. And although the deal is loaded with largely one-sided and irrevocable conditions for India, Prime Minister Manmohan Singh staked his premiership on getting the deal through.

The Wikileaks’ disclosures over the cash-for-votes scandal during the consummation process only confirm the role mucky money played in lubricating the deal. Now big money is influencing the opaque contract making.

Those who pushed the deal through without building national consensus or permitting parliamentary scrutiny now seem too invested in this deal to objectively gauge long-term safety or the cost competitiveness of reactor imports. One indication of this is the unabashed manner in which a nuclear park has been exclusively reserved — without any competitive-bidding process — for each of the four preferred foreign vendors. Yet after Fukushima, several major safety concerns stand out:

■India is committed to importing reactor models that are yet to be operated in any country, including state-owned Areva’s 1630MW European Pressurized Reactor (EPR) and the General Electric-Hitachi’s 1520MW Economic Simplified Boiling Water Reactor (ESBWR), which is still to receive the final U.S. design certification.

There is no justification for importing untried reactor models. In the 1960s, GE sold India the first two prototypes of its Boiling Water Reactor (BWR), whose designs it later supplied for all six reactors at the now-crippled Fukushima Daiichi plant. India had little option then because nuclear power was relatively new. The GE-built Tarapur plant faced important operating and safety issues, in part because the Americans cut off supply of even safety-related replacement parts in response to the Pokharan I test. Today the rush to buy untried foreign-reactor technology is simply indefensible.

It is only after the Fukushima nuclear crisis unfolded that India’s nuclear chief belatedly acknowledged the need for an earthquake- and tsunami-related safety evaluation of Areva’s EPR design. Why wasn’t this done before committing India to buy the EPR prototype?

■The drive to build energy “security” by importing foreign fuel-dependent reactors — that too without transparency, open bidding and public accountability — is nothing but a money-spending boondoggle, with the potential to generate hundreds of millions of dollars in kickbacks for the corrupt.

In an openly manipulated process, price negotiations are taking place only after each of the four chosen foreign vendors has been gifted an exclusive seaside nuclear park to build reactors. What bargaining power are the authorities left with when they have already reserved each park for a particular firm?

■With the rise of the corporate nuclear lobby, the line between the seller and the buyer has blurred. The nuclear deal was pushed through by the Prime Minister’s Office with the aid of some serving and retired nuclear officials, private-sector companies attracted to nuclear business, and interested foreign governments and vendors. The very entities and consultants that are set to reap major commercial gains helped build the dubious case for massive reactor imports by India.

Now an incestuous and unethical relationship exists between the buyer and seller, underscored by the moves to place initial import contracts worth more than $10 billion without any competitive bidding. It may require the Supreme Court’s intervention to stop this brazen cronyism, or else a 2G-style scam would likely unfold, but with long-term safety ramifications.

■To compound matters, the line between the regulator and the operator has also blurred. And the secrecy enveloping the nuclear military programme has unwarrantably been extended to a purely commercial sector — nuclear power.

Structurally, the national regulator, the Atomic Energy Regulatory Board, is in no position to act independently because, like the operator, it is under the Department of Atomic Energy. More worrying, however, is the manner in which the Board has become the handmaiden of the political agenda set in New Delhi.

Before embarking on a major expansion of its program, shouldn’t India first create a strong, truly independent nuclear regulator?

■Worse still, the planned import of four different types of new Light Water Reactor (LWR) technology will make India’s nuclear-power complex the most diverse in the world. Technological diversity may be good to obviate reliance on one supplier. But the wide-ranging diversity India is getting into will make its safety responsibilities extremely arduous and complex, given the multiplicity of reactor designs it already has in place.

It takes a long time to create teams of experienced safety engineers for any reactor model. But when a particular reactor model is still not in operation anywhere, training of engineers cannot even begin. By contrast, India has immense experience in building, operating and safeguarding indigenous CANDU-style reactors.

■The chain of incidents engulfing all six Fukushima Daiichi reactors was triggered by their close proximity to each other. With a flareup at one reactor affecting systems at another, Japan ended up with serial blasts, fires, spent-fuel exposures, and other radiation leaks.

This seriously calls into question India’s decision to approve the construction of six and more large reactors at each new nuclear park. The plans to build clusters of reactors must now be abandoned.

■At Fukushima, the spent-fuel rods — holding most of the highly radioactive uranium at the site — have proved a bigger radiation problem than the reactor cores. This shines a spotlight on the spent-fuel challenges at the sister but older plant in Tarapur, where the discharged fuel has been accumulating for over four decades because the U.S. has refused to either take it or allow India to reprocess it.

The mounting Tarapur spent-fuel stockpile poses greater safety and environmental hazards than probably at any other plant in the world. The spent-fuel rods — unlike the reactors — have no containment structure, and they endanger public safety in India’s densely-populated commercial heartland.

The spent-fuel bundles are kept under water in bays at a special facility at Tarapur. But such temporary pools have proven Fukushima’s Achilles heel.

The cost to move the spent-fuel rods in secure dry casks to a faraway desert area will be prohibitive. India already has borne high storage costs at Tarapur. Those costs should not only be billed to Washington, but India must exert pressure on America to agree to the immediate spent-fuel reprocessing under international safeguards — the only viable option to contain the risks.

■India’s nuclear accident-liability legislation has seriously burdened the Indian taxpayer by capping the liability of foreign suppliers at a modest level. With the foreign vendors also freed from the task of producing electricity at marketable rates, the taxpayer is to subsidize the high-priced electricity generated. For the foreign vendors, there is no downside risk; only profits to reap. Yet GE and Westinghouse are unhappy with the state operator’s right of recourse.

The legislation was passed after the BJP — a party too compromised to be able to withstand pressures — cut a deal with the government. But after Fukushima, it is important to tighten some provisions of the legislation, which goes beyond U.S. law to channel both economic liability and legal liability to the state and abridge victims’ legal rights.

More broadly, before signing multibillion-dollar contracts, India must first formulate a coherent nuclear-power policy that also addresses safety issues. After all, Dr. Singh is seeking to take India from a largely indigenous capacity to a predominantly import-based programme by implicitly jettisoning Dr. Homi Bhabha’s vision and strategy. Not only is the goal of a self-reliant thorium fuel cycle now pie in the sky, but India is also set to become dependent on foreign suppliers even for critical safety-related replacement parts.

Actually, the corrupt means employed in engineering the nuclear deal must now lead to its long-blocked scrutiny by Parliament. A larger question haunting the country is whether it has institutionally become too corrupt to be able to effectively uphold nuclear safety in the long run — a concern reinforced by the troubled state of internal security, high incidence of terrorism and politicization of the nuclear establishment.

The Murky Politics of Nuclear Power in India

Ghosts return to haunt nuclear deal

From the resurrected cash-for-votes scandal to a rigged process favouring four foreign vendors — and from new safety concerns to the special legislation that caps the foreign suppliers’ accident liability by burdening the Indian taxpayer — the nuclear deal’s future looks more troubled than ever

Brahma Chellaney
The Economic Times, March 18, 2011
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The unfolding nuclear disaster in Japan actually bears a distinct U.S. imprint: All six reactors at the Fukushima Daiichi plant were designed by General Electric. The prototype of this reactor model — known as the Boiling Water Reactor (BWR) Mark I — was supplied to India by GE, which built the twin-reactor Tarapur station in the 1960s on a turnkey basis. Tarapur, one of the world’s oldest operating nuclear plants, has some of the same risk factors that played a role at Fukushima.

Since the Fukushima crisis erupted, several countries have announced steps to scale back or review nuclear power, with Germany temporarily shutting down seven of its pre-1980 plants and Switzerland suspending plans to build and replace nuclear reactors. Even China, known for its lack of respect for safety issues, has announced that it is suspending new plant approvals until it could strengthen safety standards.

In contrast, New Delhi’s response has been to launch a public-relations campaign to say Indian nuclear plants are safe and secure. The very persons who blurred the line between fact and fiction in the debate over the controversial Indo-U.S. nuclear deal are again engaging in casuistry.

A smarter, wiser and more-credible course for authorities would be to acknowledge that, given the gravity of the Fukushima crisis, India must review its nuclear-power policy and systems to ensure that long-term risks of nuclear accidents are contained.

To be sure, India — given its low per capita energy consumption — needs to generate far more electricity to economically advance. So it must tap all sources of power, including safe and cost-competitive nuclear power.

The consequences of a nuclear accident in a large, densely populated country like India are going to be greater than in an island nation such as Japan. The economics of reactor imports is also a key issue in India because the taxpayer must not be burdened with more subsidies.

Yet those who pushed the nuclear deal through without building a national consensus are now too invested in that deal to be able to take an objective view of cost competitiveness and long-term safety. One indication of that has been the brazen manner in which a nuclear park has been exclusively reserved, without inviting bids, for each of the four chosen foreign vendors.

The Wikileaks disclosures over the cash-for-votes scandal only confirm what has been well known — the role of big money in lubricating the nuclear deal. Now big money is influencing the opaque contract making.

Nevertheless India’s nuclear safety — and the wisdom of a massive import-based expansion of the nuclear power programme — will now come under closer scrutiny. In fact, given the way India handled the Bhopal gas catastrophe that killed at least 22,000, Fukushima holds important implications. Although the exact sequence of events at Fukushima is still not clear, consider some obvious nuclear dangers in India:

■The chain of incidents engulfing all six Fukushima reactors was triggered by their close proximity to each other. With a flare-up at one reactor affecting systems at another, Japan has ended up with serial blasts, fires, spent-fuel exposures and other radiation leaks at the Fukushima complex. The lesson: a string of events can quickly overwhelm emergency preparedness and safety redundancies built into reactor systems.

This seriously calls into question India’s decision to approve construction of six to 12 large reactors at each new nuclear park.

■The Fukushima spent-fuel fire and other problems shine a spotlight on the spent-fuel challenges at the sister plant in Tarapur, where the discharged fuel has been accumulating for over four decades because the U.S. has refused to either take it or allow India to reprocess it. At the so-called Spent Fuel Storage Facility, the Tarapur spent-fuel bundles are kept under water in specially engineered bays.

This mounting, highly radioactive spent fuel poses major space problems and safety and environmental hazards that are greater than at any other plant in the world. In fact, the spent-fuel rods — unlike the reactor — have no containment structure. Yet New Delhi has shied away from exerting pressure on Washington to resolve an issue that threatens environmental and public safety in India’s commercial heartland.

■The operating license of the aging Tarapur BWRs has been periodically extended by the Atomic Energy Regulatory Board. Despite safety and equipment upgrades at Tarapur, the fact is that first-generation reactors have generally some dangerous weaknesses. In fact, much before the Fukushima incidents, several U.S. experts had warned that this BWR model was susceptible to explosion and containment failure.

The power shortages in the Mumbai area have influenced the decision to keep the two BWRs in operation up to 2030. But in the U.S., the utility running a BWR plant of the same vintage as in Tarapur — at Oyster Creek in New Jersey — recently decided to close it in 2019. And the Vermont State Senate last year voted to stop the less-old Vermont Yankee BWR plant from operating past next year.

From the resurrected cash-for-votes scandal to a rigged process favouring four foreign vendors — and from new safety concerns to the special legislation that caps the foreign suppliers’ accident liability by burdening the Indian taxpayer — the nuclear deal’s future looks more troubled than ever.

Brahma Chellaney is Professor of Strategic Studies at the New Delhi-based Centre for Policy Research.

Nuking rights of citizens

It’s no-risk, all-profit business for four firms

 

Brahma Chellaney

The Economic Times, August 24, 2010

 

It is a reflection of the murky politics in the country that the government was able to cut a deal with the main opposition party on the nuclear-accident liability bill, ignoring concerns that the legislation would weaken nuclear safety and deprive potential Indian victims of accidents the very rights American citizens have.

 

This is not the first time that unscrupulous politics has come to the aid of Prime Minister Manmohan Singh’s obsessive focus on the nuclear deal with the US. In July 2008, his government survived the “cash-for-votes” scandal over the nuclear deal with the help of the Samajwadi Party.

 

Today, thanks to the shadowy deal with the morally and intellectually bankrupt BJP, the political debate on the accident liability bill has boiled down to a secondary issue — the “right of recourse” of the state operator in India after an accident — while the main issue has been allowed to go by default. The primary issue is whether it is sensible for a poor country like India, where the “operator” of nuclear-power plants will remain the Indian state, to assume all liability on behalf of foreign reactor vendors.

 

What India has set out to do is unparalleled: Without inviting global bids or having first negotiated the price and terms of reactor supply, the government has earmarked a nuclear park exclusively for each of the four foreign vendors, GE, Westinghouse, Areva and Atomstroyexport. It is acquiring land on their behalf at these designated parks, where each vendor is to erect multiple reactors. The government, however, will run the reactors through its state operator, subsidizing the high-priced electricity generated.

 

Now, through the proposed accident-liability law, the suppliers also are being indemnified, with all liability (financial and legal) being channelled to the Indian state. In effect, India is offering no-risk, all-profit business opportunities to the four vendors to build 28 reactors worth some $76 billion.  

 

Given the high liability capacity being assumed — which could entail an average annual premium of nearly $1 million to be paid by the Indian taxpayer for each twin-reactor, foreign-built nuclear plant — foreign insurers are to be invited in. In case India in the future allows private players to also operate nuclear plants, the government has proposed an amendment to its own liability bill for the Indian republic to “assume full liability for a nuclear installation not operated by it.”

 

Yet few questions are being asked as to why the government is in an unseemly rush to pass such legislation and join the Convention on Supplementary Compensation, which hasn’t even come into force.

 

With the fundamental issues having been eclipsed from the debate, the focus has fallen on the right to recourse in the operator’s fiduciary liability policy. The government’s repeated attempts to dilute the right-to-recourse provisions against suppliers have exposed a disturbing dimension of the relationship between the executive branch and Parliament. First, a key word, “and”, was mysteriously added to the parliamentary standing committee’s text to water down those provisions.

 

When a furor greeted that surreptitious insertion, the government simply decided to supplant the committee’s agreed text with a new formulation that sets the right-to-recourse bar so high (“the nuclear incident has resulted as a consequence of an act of supplier or his employees, done with the intent to cause nuclear damage…”) as to render that right infructuous. All this raises troubling questions about the executive branch’s persistent moves to nullify a parliamentary committee’s work.

 

Broadly, the nuclear deal, which was pushed through without building “the broadest possible national consensus” that the PM had promised, has come to symbolize the decline of Indian politics, with self-aggrandizement replacing principles as the guiding philosophy for parties and national interests taking a back seat.

 

 (c) The Economic Times, 2010.

A win-win situation for foreign reactor vendors

Nuclear Deal: Elusive Benefits, Tangible Costs

Brahma Chellaney
The Hindu newspaper, August 19, 2010

With accident-liability protection constituting another layer of state subsidy to foreign reactor vendors, the spectre of dozens of Enrons in the nuclear-energy sector is real.

The controversial Indo-U.S. nuclear deal was pushed through without building “the broadest possible national consensus” that the prime minister had promised. Certain give-and-take is inevitable in any deal. But this deal has picked up such onerous conditions that it now threatens to cast a perpetual political albatross around India’s neck. To implement the deal, the government is now seeking to burden the Indian taxpayer on multiple counts — from state subsidy in the form of liability protection and acquisition of land on behalf of foreign vendors to guaranteeing subsidised price of electricity from the high-cost foreign reactors to be imported. The result is likely to saddle India with dozens of Enrons in the nuclear-energy sector.

The deal’s energy benefits, in fact, are years away and will come with heavy economic costs. One reminder of the costs is the proposed nuclear-accident liability legislation. The revised bill that has emerged from the parliamentary standing committee increases, not lessens, the load on the taxpayer. The bill actually seeks to enshrine a new principle in international law: Profits are private, accident-related liabilities are all public.

While U.S. law permits “economic channelling,” but not “legal channelling,” of liability, thereby allowing criminal proceedings and other lawsuits against any party in courts, the revised Indian bill channels all financial and legal liability to the Indian state operator, effectively indemnifying foreign reactor vendors. Nuclear safety can hardly be enhanced by freeing foreign suppliers upfront from responsibility for accidents caused by design flaws, pinning liability singly on the state operator, and vesting the right of recourse only with the operator by shutting out victims of accident.

Nuclear parks

A bigger indicator of the energy-related costs, however, has completely escaped public attention. The government has earmarked a nuclear park exclusively for each of the four favoured foreign vendors. GE-Hitachi is to build six reactors at Kovvada (Andhra Pradesh), Westinghouse another six at Mithi Virdi (Gujarat), Areva a further six at Jaitapur (Maharashtra), and Russia’s Atomstroyexport six more at Kudankulam (Tamil Nadu) and an additional four later at Hirapur (West Bengal).

The reservation of a nuclear park for each foreign vendor even before the terms of a reactor contract have been negotiated is anti-competitive and unparalleled. To add to the pampering, India is also acquiring land on behalf of these firms.

Despite an inherently anti-market process, the government contends the contracts will be based on competitive pricing. But by reserving a park solely for each foreign vendor, it has undercut its own bargaining leverage. Just like the arms deals of recent years, the reactor contracts are all set to be signed without open bidding. Indeed, since the deal was unveiled in 2005, India has signed billions of dollars worth of arms contracts with America on a government-to-government basis, although the U.S. has no public sector.

Worse yet, foreign firms are being freed from the task of producing electricity at marketable rates. The reactors will be run by the state operator, with the Indian taxpayer subsidising the high-priced electricity generated. It may take nearly a decade before the first foreign reactor under the nuclear deal comes on line, if one goes by Areva’s record in Finland and Atomstroyexport’s at Kundankulam, where completion of a twin-reactor station is years behind schedule.

Technology controls

Yet another jarring aspect is that despite the deal being in force internationally, India continues to battle major technology sanctions. The deal has not lifted all technology controls even in the civilian nuclear field: In late June, the G-8 countries renewed their ban on sale of civilian enrichment and reprocessing (ENR) technology and equipment, even under international safeguards, to a non-NPT state like India. The Indian foreign secretary has described as “anachronistic” the continuing U.S. export controls against India that extend beyond the nuclear realm to cover advanced technologies and target civilian entities like ISRO. The PM, however, had triumphantly announced in 2008 that the deal “marks the end … of the technology-denial regime against India.”

The idea to build energy “security” by importing foreign fuel-dependent power reactors is nothing but a money-spending boondoggle likely to leave India insecure and buffeted by outside pressures. That spectre has been underscored by the four big “No”s for India embedded in the final deal: No binding fuel-supply guarantee to avert a Tarapur-style fuel cut-off; no irrevocable reprocessing consent; no right to withdraw from its obligations; and no right to conduct a nuclear test ever again.

The government has shied away from discussing even the economics of producing electricity from foreign reactors. India’s heavily-subsidised indigenous nuclear-energy industry is supplying electricity at between 2.70 and 2.90 rupees per kilowatt hour from the reactors built since the 1990s. That price is far higher than the cost of electricity from coal-fired plants. But electricity from foreign-built nuclear reactors will be even dearer. That, in effect, will increase the burden of subsidies on the Indian taxpayer, even as the reactor imports lock India into an external-fuel dependency.

The revised accident-liability bill does well to double the permissible time period for filing accident-related claims against the state operator. Increasing the compensation fund is also welcome, although there is no need realistically for minimum or maximum cap on liability when the Indian state is making itself wholly responsible for damages from an accident. But most other changes that have emerged from the standing committee’s deliberations or from the government’s disingenuous deal-making with the BJP do not address the fundamental concerns, which centre on relieving foreign vendors of direct liability for any accident and abridging the legal rights of victims.

Indemnifying foreign suppliers helps to significantly lower their costs and risks of doing business in India. But in extending such protection, the bill aims to overturn the doctrine of “absolute liability” laid down by the Supreme Court that prevents “enterprises” (including the operator, supplier, builder and owner) from wriggling out of their liability by claiming exemptions, such as alleged sabotage. The Supreme Court held after the Bhopal gas disaster that, “The enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-à-vis the tortious principle of strict liability.” By that standard, foreign reactor vendors would be fully liable for any wilful act or gross negligence that causes a nuclear accident.

The bill, however, casts all liability on the state operator and the federal government. The liability bill thus is a major liability for the Indian taxpayer.

A way out

The sensible course of action in nuclear energy would be for the government to let foreign vendors acquire land on their own at designated sites, build and operate reactors, and sell electricity to distribution companies without the Indian taxpayer in any way being burdened. If foreign firms produce nuclear energy at competitive prices, the benefits for India will be real. Even the cap on accident liability can be arranged by emulating the U.S. example so that the Indian taxpayer is the insurer of last resort, not of first resort. For each major radioactive release, America’s Price-Anderson liability system provides more than $10 billion in total potential compensation through a complex formula that includes insurance coverage carried by the reactor that suffered the accident, “retrospective premiums” from each of the covered reactors in operation in the U.S., and a five per cent surcharge. The liability burden thus falls on the private sector.

The Indian government, however, has no intention to create an open, competitive field because that would unmask and obstruct the generous state subsidies it is offering for nuclear-generated power. It thus told Parliament categorically on August 12 that it “does not intend to change the related provision of the Atomic Energy Act, 1962, for private participation” in nuclear energy.

Creating an artificial market with no-strings subsidies and electricity supply at state-supported rates is no prudent way to meet energy needs. The proposed arrangements actually seek to create a win-win situation for foreign vendors by ensuring there is no downside to their business. By rigging commercial terms in favour of select foreign suppliers, the arrangements, in effect, promote unfair business practices and cartelisation.

( Brahma Chellaney is the author, among others, of Nuclear Proliferation: The U.S.-India Conflict.)

The U.S.-India nuclear deal

The wages of the nuclear deal

 

Brahma Chellaney

Mint, August 16, 2010

 

http://www.livemint.com/2010/08/15215312/The-wages-of-the-nuclear-deal.html

 

The quiet signing of the reprocessing agreement on 30 July has completed the last remaining bilateral element of the nuclear deal with the U.S. The multilateral elements are not only complete, but also being implemented. For example, India already has brought 16 of its nuclear facilities under permanent international inspection — a number scheduled to progressively go up to cover two-thirds of all Indian nuclear installations within four years. In addition, India is set to shut down by this year-end its main military-production workhorse, the Cirus reactor — the biggest cumulative contributor of weapons-grade plutonium to the country’s stockpile.

 

Yet, despite the deal being in force, India continues to battle major technology controls. China has greater access than India does to U.S. high technology, and this is unlikely to change after the ongoing Obama administration review of American export controls. Because the review is being driven by the barely disguised business goal to increase U.S. share of the Chinese market so as to reduce the yawning trade deficit, the China-India access gap can only widen in Beijing’s favour.

 

            What tangible benefits, strategic or otherwise, has the deal yielded for India? Let’s face it: The Americans were more honest than the Indians about the deal. The final deal has turned out to be in line with what the U.S. Congress mandated, not what the Indian Parliament had repeatedly been assured by Prime Minister Manmohan Singh.

 

            In fact, the deal conforms fully to the provisions of the 2006 Hyde Act. The congressional ratification legislation — the 2008 Nuclear Cooperation Approval and Non-Proliferation Enhancement Act, or NCANEA actually tightened some of the Hyde Act provisions. The Indian side had publicly claimed that the Hyde Act would not determine the final deal, with some in authority even seeking to creatively differentiate between “operative” and “non-binding” parts of that Act. It had further been claimed that the 123 Agreement, once ratified, would become the “last expression of the sovereign will” and override all other laws including national laws.

 

These too-clever-by-half arguments have fallen flat on their face. Nothing can be more embarrassing to the Indian side than the fact that the bilateral accords it negotiated and signed — the 123 Agreement and the reprocessing pact — match up to U.S. congressional stipulations.

 

Worse still, the accords have been made subservient to American law. Take the 123 Agreement, which neither contains the international-law principle (found in the U.S.-China accord) that neither party will invoke its internal law as justification for a failure to honour the accord, nor provides (unlike the U.S.-Japan or U.S.-South Korea accord) for an arbitral tribunal to settle any dispute. As the NCANEA makes explicit, “Nothing in the [123] Agreement shall be construed to supersede the legal requirements of the Henry J. Hyde Act.”

 

As a result, the final deal ends up giving America specific rights — enforceable through the pain of unilateral suspension or termination of cooperation — while saddling India with obligations. The NCANEA actually records that the promise of uninterrupted fuel supply is a “political,” not legal, commitment. It cannot be anything else because the 123 Agreement itself confers an open-ended right on the U.S. to suspend fuel supplies straight away while issuing a one-year termination notice. In fact, as a corollary to that right, the U.S. has retained the prerogative in the reprocessing accord to unilaterally suspend its reprocessing consent to India.

 

            What stands out about the final deal are the four “No”s for India: No binding fuel-supply guarantee to avert a Tarapur-style fuel cut-off; no irrevocable reprocessing consent; no right to withdraw from its obligations; and no right to conduct a nuclear test ever again. The no-test obligation constitutes the first instance in the nuclear age where one nuclear-weapons power has used a civilian cooperation deal to impose such a prohibition on another nuclear-weapons state. The Cirus’s impending dismantlement is another weapons-related obligation thrust on India.

            No country in history has struggled longer to build a minimal deterrent or paid heavier international costs for its nuclear programme than India. Despite Asia’s oldest nuclear programme, India now has the world’s smallest nuclear arsenal — smaller than even Pakistan’s. More significant is that India still does not have a single Beijing-reachable nuclear missile in its inventory or production line. It is against that background that the nuclear deal marks a turning point.

 

The lasting legacy of the deal, in which the Indian government invested considerable time and diplomatic resources, will be to ensure that India stays enmeshed in its struggle to build regionally confined nuclear-weapons capability while becoming more reliant than ever on conventional arms imports to meet its basic defence needs. If ever there was hope of India becoming a full-fledged nuclear-weapons state like China, that prospect has passed.

 

A closer relationship with the U.S. is in India’s own interest. But it could have been built without a deal that carries serious, long-term costs. Indeed, such are the wages of the deal that India has refrained from speaking up on regional-security issues that directly impinge on its interests, including the continuing transfer of offensive U.S. weapon systems to Pakistan, now the largest recipient of American economic and military aid in the world. Islamabad, in fact, has managed to cut its own deal to buy two China-origin reactors without the burden of conditions cast on India.

 

Brahma Chellaney is professor of strategic studies at the Centre for Policy Research in New Delhi

 

Comments are welcome at theirview@livemint.com

Seven key revisions needed in India’s nuclear-accident liability bill

HOT POTATO

BRAHMA CHELLANEY, STRATEGIC AFFAIRS EXPERT

Revisions in N-liability bill a must

DUE TO EXTRAORDINARY MOLLYCODDLING, THERE ARE NO RISKS FOR FIRMS ENTERING INDIAN MARKET, ONLY PROFITS TO RAKE IN

The Economic Times, April 6, 2010 http://u.nu/35v48

After
the national furore, the government has begun to redraft its nuclear-accident
liability Bill. It was left with little choice: Unlike the 123 agreement or the
latest reprocessing accord with the
US, the proposed new law on
liability has to go before Parliament for scrutiny and approval.

The
Bill it circulated to members of Parliament last month attempted to
fashion a new principle in
international law: Profits are private, accident-related liabilities are all
public. The Bill gave foreign reactor suppliers a free ride at the Indian
taxpayer’s expense.

Limits on
liability traditionally have been designed in the world to limit the financial
risks of private firms engaged in the business of nuclear-generated
electricity. But in
India
the state intends to own and operate all nuclear power plants. That is the
reason why the Atomic Energy Act, which shuts out the private sector from
nuclear power generation, is not being amended.

But foreign
reactor suppliers cannot complain because they are in an exceptionally happy
situation. The Indian government has earmarked separate nuclear parks for each
of the two American reactor-exporting firms as well as for the sole French and
Russian companies. It is acquiring land for them. It also is freeing them from
the task of generating electricity at marketable rates. The government will run
the reactors through the state operator, subsidizing the high-priced
electricity generated. To top it all, foreign suppliers will have no
direct accident liability.

So, given this
extraordinary mollycoddling, there are no risks for foreign firms in entering
the Indian market, only profits to rake in.

Against
this background, the liability Bill must contain seven essential revisions.

■One, there
is no need for a limit on liability as the Indian state, in any case, will be
the sole owner and operator. There is no maximum cap on liability in the
US, Germany,
Finland, Japan, South Korea
and
Switzerland.
The proposed Indian law must mesh with the doctrine of absolute liability and
“polluter pays” principle set by the Supreme Court in response to the
Bhopal gas disaster.

■Two, the
minimum cap should reflect the international trend of providing enough to deal
with the long-term public health problems likely to be caused by a nuclear
accident. For example,
Japan’s minimum liability is 120 billion yen ($1.33 billion).

Three, the revised Bill
should not relieve foreign companies of direct liability for any accident. Nor
should
victims be stripped of their right to sue a culpable foreign firm
in an Indian court, or through a foreign court.

India ought to follow the example set by US law, which
permits “economic channelling,” but not “legal channelling,” of liability,
thereby allowing civil suits against any party in
courts. That is the main reason why the
US
has not joined the
Vienna or Paris convention — the two main international
liability instruments. But the
U.S.
has become party to the Convention on Supplementary Compensation (CSC), which
is still not in force. The CSC,
as the name
suggests,
is about compensation, to be paid
“supplementary” to the liability limit. The CSC permits either “economic
channelling”
or “legal channelling” of liability.

Why
shouldn’t
India emulate the US example and
permit economic (but not legal) channelling of liability to the operator? That
will leave suppliers (foreign or Indian) legally liable for an accident, but
allow for speedy disbursement of compensation to victims following an accident.

■Four, the
Indian taxpayer ought to be the insurer of last resort, not of first resort. In
the existing Bill, all liability falls on the Indian taxpayer, whether it is
the state operator’s slice or the Central Government’s share. By contrast,
America’s Price-Anderson
system is without cost to the American taxpayer. It ensures that there is at
least $10.5 billion in private-sector funds available to cover a nuclear
accident. As the
US
has no cap on liability, the US Congress serves as the insurer of last resort.
If a catastrophic accident were to occur, Congress could raise its contribution
not by burdening the taxpayer but by imposing additional taxes and other levies
on the nuclear industry.

■Five, the
new Bill must do away with the specious distinction between the operator and
the government when, in the Indian context, both are fused. Throughout the
existing Bill, the pretence of a US-style separation between the operator and
the government in maintained.

■Six, the
powers of
Indian courts must not be curtailed.
Under the existing Bill, all nuclear-damage claims will be dealt with by a
Claims Commissioner or a Nuclear Damage Claims Commission, and any award made
“shall be final” and cannot be appealed in any court. Indeed, it declares that
“no civil court shall have jurisdiction to entertain any suit or proceedings” or
grant any “injunction.”

■Seven, while
limiting
liability in time, the Bill must set a
more reasonable timeline, given that damage to health from exposure to severe
radiation can be transmitted to future generations. The 10-year time limit set
in Clause 18 of the existing Bill is simply
untenable.

Brahma Chellaney is professor of strategic
studies at the Centre for Policy Research.