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
https://i1.wp.com/www.thehindubusinessline.com/multimedia/dynamic/00503/nuclear-radiation_503558f.jpg
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.

Shutting out Parliament from scrutinizing nuclear deal

Bypassing Parliament

Brahma Chellaney  DNA newspaper, April 2, 2010

One more accord has been concluded under the much-trumpeted Indo-US nuclear deal. But like the previous two —the 123 bilateral agreement with the US and the safeguards accord with the International Atomic Energy Agency (IAEA) — the latest agreement, too, will escape scrutiny by the Indian Parliament. The newest agreement involves US consent to India to reprocess spent fuel of American origin.


Is it a good advertisement for the world’s most-populous democracy that while the American president will submit the reprocessing agreement to the US Congress for scrutiny, the Indian Parliament will again be shut out from playing any role on this latest accord? How can there be effective checks and balances in a democracy if the executive branch insists that the national legislature has no role to play in any international agreement?

It is only on the nuclear-accident liability issue that the government is coming to Parliament because that involves passing a new law. In fact, it wants Parliament to pass a law that limits liability to a pittance, overturning the doctrine of absolute liability that the Supreme Court has set in response to the Bhopal gas disaster. 

The result of blocking Parliament from scrutinizing the nuclear deal is that India is now saddled with a deal that does not adequately protect its interests. India has got no legally binding fuel-supply guarantee to avert a Tarapur-style fuel cutoff, and no right to withdraw from its obligations under any circumstance, although the US has reserved the right for itself to suspend or terminate the arrangements.

The terms of the latest reprocessing agreement are in continuation of what the US was able to extract in the 123 bilateral agreement. The US has retained the right to unilaterally suspend its grant of reprocessing consent to India. This is an extension of its right, incorporated in the 123 agreement, to unilaterally suspend or terminate fuel supply to India. That is exactly what the US did in the mid-70s under its previous 123 agreement with India dating back to 1963. As a result, the twin-reactor, US-built Tarapur nuclear power plant near Mumbai, was left high and dry.

In the newest 123 agreement, the US has retained the legal right to unilaterally terminate cooperation but provided political assurances to India that such a right will be exercised only in extraordinary circumstances. A similar approach is mirrored in the reprocessing accord.

Under article 7 of the reprocessing accord, the reprocessing consent can be suspended on grounds of “national security” or a “serious threat to the physical protection of the facility or of the nuclear material at the facility,” and if the party determines “that suspension is an unavoidable measure.” So the US right to suspend reprocessing consent is unfettered.

Still, the agreement’s article 7 and the accompanying “agreed minute” record political assurances to India that such a right shall be exercised only in special circumstances and after careful thought. But such assurances hold little value when the legal right to suspend reprocessing consent is explicitly recorded in the text.

The actual implementation of the reprocessing agreement is years away, even though US-origin spent fuel has been accumulating in India for nearly 40 years at Tarapur.

India will not be able to reprocess that spent fuel until it has built at least one new dedicated reprocessing facility — a process that will take a number of years. Article 1(3) specifies that the US consent relates to “two new national reprocessing facilities established by the government of India.” Only in those new facilities, approved by the IAEA, can India reprocess the discharged fuel under international inspection. Any additional reprocessing facility can be added only with prior US agreement.

Another feature of the agreement is that it amplifies India’s reprocessing obligations with the IAEA, including to provide facility-design information in advance and to allow unhindered international monitoring and verification (article 2). But in addition, the accompanying “agreed minute” obligates India to permit US “consultations visits” to each dedicated reprocessing facility. Every “visiting team of not more than 10 persons” will be permitted onsite access “at a time and duration mutually agreed by the parties.”

It is thus apparent that the US has got what it wanted. For example, the state department had earlier notified the US Congress in writing that “the proposed arrangements and procedures with India will provide for withdrawal of reprocessing consent” by the US. That is exactly what the text of the accord provides. Also by providing for US “consultations visits,” it effectively permits IAEA-plus inspections.

Had the Parliament been allowed to play a role, the government would have been able to leverage that to fight back one-sided provisions.

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

(c) DNA, 2010.

Full official text and key features of U.S.-India reprocessing agreement

Reprocessing-related arrangements and procedures agreed between the United States and India

KEY FEATURES:

The actual implementation of the agreement is years away, even though U.S.-origin spent fuel has been accumulating in India for nearly 40 years at the U.S.-built Tarapur nuclear power station near Mumbai. India will not be able to reprocess that spent fuel until it has built at least one new dedicated reprocessing facility — a process that will take a number of years. Article 1(3) specifies that the U.S. consent relates to “two new national reprocessing facilities established by the Government of India.” Only in those new facilities, approved by the IAEA, can India reprocess the discharged fuel under international inspection. Any additional reprocessing facility can be added only with prior U.S. agreement.

The United States has retained the right to unilaterally suspend the grant of reprocessing consent to India. This is an extension of its right, incorporated in the 123 bilateral agreement, to unilaterally suspend or terminate fuel supply or all civil nuclear cooperation with India. In fact, that is exactly what the United States did in the mid-1970s under its previous 123 agreement with India dating back to 1963. As a result of that action, the twin-reactor Tarapur plant was left high and dry.  In the newest 123 agreement, the U.S. has retained the legal right to unilaterally terminate cooperation but has provided political assurances to India that such a right will be exercised only in extraordinary circumstances. A similar approach is mirrored in the reprocessing accord.  

Under Article 7 of the reprocessing accord, the reprocessing consent can be suspended on grounds of “national security” or a “serious threat to the physical protection of the facility or of the nuclear material at the facility,” and if the party determines “that suspension is an unavoidable measure.” So the U.S. right to suspend reprocessing consent in unfettered. Still, the agreement’s Article 7 and the accompanying Agreed Minute record political assurances to India that such a right shall be exercised only in special circumstances and after careful thought. But such assurances can hold little value when the legal right to suspend reprocessing consent is explicitly recorded in the text.

It is noteworthy that the U.S. has retained the right to suspend all cooperation with India, including the withdrawal of reprocessing consent, if India were to carry out a nuclear test. The assurances that have been recorded relate only to "peaceful" nuclear activities and fuel choices by India. For example, the Agreed Minute states that the reference to “serious national security concerns” as a basis for suspension of reprocessing consent shall not mean or be the basis for "addressing differences between the parties on the nature of peaceful nuclear activities," or "addressing differences with regard to fuel cycle choices," or "the purpose of securing commercial advantage," or "the purpose of delaying, hampering or hindering peaceful nuclear activities of the other party." The United States thus can continue to hold India to a no-test obligation.

Another feature of the agreement is that it amplifies India’s reprocessing obligations with the IAEA, including to provide facility-design information in advance and to allow unhindered international monitoring and verification (Article 2). But in addition, the accompanying Agreed Minute obligates India to permit U.S. “consultations visits” to each dedicated reprocessing facility. Every “visiting team of not more than 10 persons” will be permitted on-site access “at a time and duration mutually agreed by the parties.”

►The agreement relates only to U.S. reprocessing consent, not to transfer of reprocessing technology and equipment. Unlike America’s arrangements with Japan and Euratom, the arrangements with India (as reflected in the 123 bilateral agreement and the domestic Hyde Act) exclude transfer of enrichment and reprocessing technology even under international safeguards. 

►The agreement does not provide for an international arbitral tribunal to resolve any differences or disputes — a provision found in the U.S.-Japan arrangements. It only provides for bilateral consultations — a mechanism where the cards will be stacked in favor of the supplier state and against the recipient state. Any compensation payable to India for a unilateral U.S. suspension of reprocessing consent will depend entirely on American willingness to do so. The agreement states that, "In case the suspension extends beyond a period of six months, both parties shall enter into consultations on compensation for the adverse impact on the Indian economy due to disruption in electricity generation and loss on account of disruption of contractual obligations." So, the agreement is to "consult" over compensation, not to actually compensate India. If the U.S. eventually agrees to pay any compensation, the amount will be determined by it.  

India’s obligations remain in perpetuity. U.S. suspension of reprocessing consent will not free India of any of its obligations under the 123 agreement. This is recorded in Article 7(8). That, again, is an extension of what the 123 agreement states explicitly.

►The agreement employs the term, "U.S.-obligated," instead of "U.S.-origin," nuclear material to help broaden coverage. Because U.S.-built reactors and the dedicated reprocessing facilities would be both under IAEA safeguards, India could in the event the U.S. cut off fuel supply and suspended reprocessing consent use other foreign-origin fuel to run those plants and then reprocess their discharged fuel. To preclude that possibility, the term, "U.S.-obligated," has been used in the reprocessing agreement to include the use of both U.S.-origin reactors and U.S.-origin fuel. So, if the U.S. were to suspend its fuel shipments and reprocessing consent, India would not be able to reprocess spent fuel of other foreign origin. That helps increase the costs for India of any suspension.

In sum, India has a deal under which it got no legally binding fuel-supply guarantee to avert a Tarapur-style fuel cut-off; no irrevocable reprocessing consent; and no right to withdraw from its obligations under any circumstance, although the U.S. has reserved the right for itself to suspend or terminate the arrangements if it holds India not to be in compliance with the stipulated terms. Moreover, the continuation of the deal will hinge on India not conducting a nuclear test ever again. These are the four "no"s embedded in the deal.

In fact, this is the first case in world history where one nuclear-weapons state has used a civilian cooperation deal to impose a weapons-related prohibition on another nuclear-weapons state, which has only a rudimentary nuclear military capability. It is apparent that chances are virtually zero of India ever becoming a nuclear-weapons power in the same league as China, the U.S., Britain, France and Russia, in terms of having an intercontinental-range thermonuclear capability. India, at best, can be a second-tier nuclear-weapons state that in due course would, hopefully, develop sufficient but regionally-confined nuclear capability to deter its main security challenge, China.

As far as the reprocessing accord is concerned, the U.S. has got what it wanted. For example, the State Department had earlier notified Congress in writing that “the proposed arrangements and procedures with India will provide for withdrawal of reprocessing consent” by the U.S. That is exactly what the text of the accord provides. Also by providing for U.S. “consultations visits,” the accord effectively permits IAEA-plus inspections.

That means the U.S. Congress is unlikely to exercise the right to reject the reprocessing accord through a joint resolution of disapproval passed by both chambers — a high bar in any case. Section 201 (titled "Procedures Regarding a Subsequent Arrangement on Reprocessing") of the U.S. legislation ratifying the nuclear deal with India, the 2008 United States-India Nuclear Cooperation Approval and Nonproliferation Enhancement Act, reads as follows:

(a) In General- Notwithstanding section 131 of the Atomic Energy Act of 1954 (42 U.S.C. 2160), no proposed subsequent arrangement concerning arrangements and procedures regarding reprocessing or other alteration in form or content, as provided for in Article 6 of the Agreement, shall take effect until the requirements specified in subsection (b) are met.

(b) Requirements- The requirements referred to in subsection (a) are the following:

(1) The President transmits to the appropriate congressional committees a report containing–

(A) the reasons for entering into such proposed subsequent arrangement;

(B) a detailed description, including the text, of such proposed subsequent arrangement; and

(C) a certification that the United States will pursue efforts to ensure that any other nation that permits India to reprocess or otherwise alter in form or content nuclear material that the nation has transferred to India or nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material, or equipment that it has transferred to India requires India to do so under similar arrangements and procedures.

(2) A period of 30 days of continuous session (as defined by section 130 g.(2) of the Atomic Energy Act of 1954 (42 U.S.C. 2159 (g)(2)) has elapsed after transmittal of the report required under paragraph (1).

(c) Resolution of Disapproval- Notwithstanding the requirements in subsection (b) having been met, a subsequent arrangement referred to in subsection (a) shall not become effective if during the time specified in subsection (b)(2), Congress adopts, and there is enacted, a joint resolution stating in substance that Congress does not favor such subsequent arrangement. Any such resolution shall be considered pursuant to the procedures set forth in section 130 i. of the Atomic Energy Act of 1954 (42 U.S.C. 2159 (i)), as amended by section 205 of this Act.

________________________________________________________________________________________________________________________________________

FULL OFFICIAL TEXT: "Arrangements and Procedures Agreed Between the Government of the United States and the Government of India, Pursuant to Article 6(iii) of Their Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy" (text released on March 29, 2010)

The Government of the United States of America and the Government of India (hereinafter “the Parties”), pursuant to the Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy, with Agreed Minute, signed at Washington, on October 10, 2008 (“the Agreement for Cooperation”), which entered into force on December 6, 2008.

CONSIDERING the commitment to full civil nuclear cooperation between the two countries in the peaceful uses of nuclear energy as noted in Article 6 of the Agreement for Cooperation;

NOTING that cooperation under the Agreement for Cooperation is between two States possessing advanced nuclear technology, both Parties having the same benefits and advantages, both committed to preventing WMD proliferation;

DESIRING to implement the provisions of Article 6(iii) of the Agreement for Cooperation concerning arrangements and procedures for the reprocessing or other alteration in form or content of nuclear material transferred pursuant to the Agreement for Cooperation and nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material, or equipment so transferred;

NOTING that the “Agreement between the Government of India and the International Atomic Energy Agency for the Application of Safeguards to Civilian Nuclear Facilities” (INFCIRC/754)(“India-Specific Safeguards Agreement”), which provides for safeguards on reprocessing plants, entered into force on May 11, 2009;

Have agreed on the following arrangements and procedures under which such reprocessing or other alteration in form or content may take place in India at two new national reprocessing facilities dedicated to reprocessing safeguarded nuclear material under International Atomic Energy Agency (“IAEA”) safeguards, including future expansion, modifications, renovations or additions thereto;

ARTICLE 1 – NOTIFICATION AND EFFECTIVENESS OF RIGHT TO REPROCESS

1. The Government of India shall notify the Government of the United States of America in writing that it has established a facility (“the Facility”). The notification shall contain:

a. the name of the owner or operator of the Facility;

b. the name, type and location of the Facility and its planned capacity;

c. confirmation that pursuant to Paragraph 14(a) of the India-Specific Safeguards Agreement, as referenced in Article 10(2) of the Agreement for Cooperation, India has notified the Facility to the IAEA for application of IAEA safeguards and that relevant safeguards arrangements have been agreed pursuant to the India-Specific Safeguards Agreement with the IAEA;

d. such information as is available to the Government of India on the IAEA safeguards approach that is not classified as “Safeguards Confidential”; and

e. a confirmation that physical protection measures as required by Article 8 of the Agreement for Cooperation will be applied at the Facility.

Both Parties confirm that the provisions of this Article or any subsequent Article of these Arrangements and Procedures shall not be used to secure any proprietary or commercially sensitive information about the Facility.

2. The Government of the United States of America shall provide an acknowledgement to the Government of India no later than thirty days after receipt of the notification. This acknowledgement shall be limited to a statement that the notification has been received.

3. It is understood that the phrase “the Facility” throughout these Arrangements and Procedures is intended to refer to two new national reprocessing facilities established by the Government of India to reprocess U.S.-obligated nuclear material and any other safeguarded nuclear material and dedicated to the reprocessing and, as required, other alteration in form or content of safeguarded nuclear material under IAEA safeguards, as well as any additional new national facilities established and agreed to in accordance with paragraph 4 of this Article.

4. The Government of the United States of America and the Government of India understand the need for sufficient indigenous Indian capacity to reprocess or otherwise alter in form or content, under IAEA safeguards, U.S.-obligated nuclear material subject to the Agreement for Cooperation. Based on this understanding, the Parties agree to pursue the steps necessary, consistent with their national laws, to permit reprocessing or alteration in form or content of nuclear material subject to the Agreement for Cooperation at one or more new additional national facilities in India, (beyond the two facilities provided for in these Arrangements and Procedures) established by the Government of India and dedicated to the reprocessing and, as required, other alteration in form or content of safeguarded nuclear material under IAEA safeguards. These Arrangements and Procedures shall apply to such facilities upon successful completion of these steps, unless otherwise agreed by the Parties.

ARTICLE 2 – IAEA SAFEGUARDS

1. Consistent with the provisions of the Agreement for Cooperation, the Government of India shall offer the Facility for the application of IAEA safeguards as per the provisions of the India-Specific Safeguards Agreement. For the timely detection of withdrawal of safeguarded nuclear material from civilian use, safeguards measures shall include, as specified by the India-Specific Safeguards Agreement, nuclear material accountancy, design review, verification, progress in construction, appropriate containment and surveillance systems, process monitoring and other measures as may be agreed with the IAEA.

2. The Government of India shall ensure that the following minimum requirements, consistent with paragraph 37 of the India-Specific Safeguards Agreement, for the implementation of IAEA safeguards at the Facility are fulfilled:

a. Facility Design

i. Early Provision of Design Information.

The operator of the Facility shall co-operate with the IAEA by providing design information at the earliest possible time as provided in Paragraph 40 of the India-Specific Safeguards Agreement.

ii. Effective Design Review.

India and the operator of the Facility, as appropriate, shall cooperate with the IAEA in allowing “design information verification” (DIV) activities.

iii. Incorporation of Design Features that Facilitate Safeguards.

As may be required by the IAEA, facility design and operational characteristics shall enable effective and efficient implementation of safeguards while precluding design features that would prevent the effective application of safeguards. Examples include, but are not limited to: installation of vessel calibration systems; effective methods of solution mixing and sampling; and installation of independent instruments as dictated by authentication concerns.

b. Safeguards System Design and Installation

i. Cooperation with the IAEA.

The Facility operator and the Safeguards Implementing Agency of the Government of India (hereinafter referred to as the Indian SIA) shall accommodate the installation and operation of IAEA instrumentation in the Facility, including data collection, authentication systems and tamper-indicating devices.

ii. System of Accounting and Control Capable of Providing Accurate, Timely Data.

The operator of the Facility and the Indian SIA shall maintain a comprehensive and accurate nuclear materials accountancy system that conforms to IAEA standards as per the provisions of the India-Specific Safeguards Agreement, so that reliable and timely declarations can be made to the IAEA. A system of inventory records and reports shall be maintained for each material balance area. An effective system for measurement control shall be utilized.

iii. In-Process Material Measurement.

The Facility operator and the Indian SIA shall cooperate with the IAEA to enable the IAEA to provide at the Facility measurement capabilities that the IAEA considers as necessary to cover all major in-process nuclear material inventories during plant operation.

iv. Process Monitoring Data.

If desired by the IAEA, the Facility operator shall provide to the IAEA access to safeguards relevant operator data, such as authenticated process control data as per the provisions of the India-Specific Safeguards Agreement and India’s Additional Protocol when in force.

v. On-site Laboratory.

The Facility design shall incorporate an on-site laboratory, if IAEA so requests, to perform destructive analysis of process samples required by the IAEA safeguards approach at the Facility, and the IAEA shall be permitted to set up and operate that laboratory.

vi. Containment and Surveillance Systems.

The Facility design shall take into account the use of containment and surveillance systems in accordance with the IAEA’s practices and procedures, as required for the effective implementation of safeguards, and the IAEA shall be permitted to maintain such systems at the Facility.

c. Safeguards Implementation

i. Verification of Accountancy of Records.

The IAEA shall be permitted to carry out regular verification of nuclear material accountancy records and reports.

ii. Remote Data Transmissions.

The IAEA, if it considers it efficient for the purpose of safeguards implementation, may use remote transmission, in accordance with the provisions of India’s Additional Protocol when in force, of authenticated data to enable more frequent data analysis.

iii. Data Authentication.

The Parties recognize the importance of reliable instrumentation for the purpose of timely and accurate safeguards related data, and of data authentication for safeguards implementation. The Facility operator shall cooperate with the IAEA to apply adequate authentication methods to data and samples collected for safeguards purposes.

iv. Access and Transparency.

The Facility operator and the Indian SIA shall provide sufficient access to IAEA Inspectors to install and maintain safeguards equipment, and to inspect the complete process activity of the operator (including sample-taking) to the extent required for safeguards implementation and maintain a complete understanding of plant operation.

v. Annual Cleanout Inventory.

Nuclear material shall be removed from process lines annually in order to make it available, to the extent practicable, for accurate physical inventory verification.

vi. Anomaly Resolution.

The operator of the Facility and the Indian SIA shall cooperate with IAEA inspectors to resolve anomalies, if any, including material accounting anomalies, in a timely fashion.

ARTICLE 3 – CONSULTATION

The Parties undertake to consult at the request of either Party regarding the implementation of these Arrangements and Procedures.

ARTICLE 4 – PHYSICAL PROTECTION AND STORAGE AT THE FACILITY

1. In implementing physical protection at the Facility, and to the spent fuel and separated special fissionable material at the Facility, the Government of India shall apply measures in accordance with (i) levels of physical protection at least equivalent to the recommendations published in the IAEA document INFCIRC/225 Rev. 4 entitled “The Physical Protection of Nuclear Material and Nuclear Facilities,” and in any subsequent revisions of the document agreed to by the Parties, and (ii) the provisions of the 1980 Convention on the Physical Protection of Nuclear Material and any amendments to the Convention that enter into force for both Parties.

2. The Parties agree to exchange information on the approach to implementation of the requirements of this Article. The Parties shall also hold consultations visits at the Facility with respect to U.S.-obligated nuclear material in accordance with paragraph I of the Agreed Minute.

3. Any information provided by the Government of India pursuant to this Article that is classified shall be protected in accordance with Article 8 of these Arrangements and Procedures.

ARTICLE 5 – ENVIRONMENTAL PROTECTION

The Government of India shall follow best practices, as established in its national regulations, for minimizing the impact on the environment which may arise from the operation of the Facility.

ARTICLE 6 – MANAGEMENT OF SAFEGUARDED SEPARATED PLUTONIUM

India is committed to the management of separated safeguarded plutonium in ways that are consistent with its national decisions on the civil nuclear fuel cycle. The management of separated safeguarded plutonium subject to these Arrangements and Procedures by the Government of India shall take into account the need to avoid contributing to the risks of nuclear proliferation; the need to protect the environment, workers and the public; the potential of the material for further energy generation; and the importance of balancing supply and demand, including demand for reasonable working stocks for civil nuclear operations.

ARTICLE 7 – SUSPENSION OF ARRANGEMENTS AND PROCEDURES

1. The Parties note the significance of the full and continued implementation of these Arrangements and Procedures concluded pursuant to Article 6(iii) of the Agreement for Cooperation for implementing full civil nuclear cooperation as envisioned in the Joint Statement of the Parties of July 18, 2005. The Parties recognize that these Arrangements and Procedures should facilitate and ensure the development of further cooperation in the field of peaceful uses of nuclear energy on a stable, reliable and predictable basis. The Parties have also agreed to take into account the effects of suspension of these Arrangements and Procedures on other aspects of cooperation under the Agreement for Cooperation.

2. The Government of India may undertake a temporary pause of limited duration in

operations at the Facility if in its view such an action is required on account of

specific circumstances regarding the Facility that may have an impact on the

safe and secure operation of the Facility, the continued application of IAEA

safeguards or physical protection measures, or the safety of personnel working in it or to the population in surrounding areas. The Government of India has the right to resume operations at the Facility when it decides that the specific circumstances that led to the temporary pause in operations no longer exist.

3. The Parties agree that the sole grounds for seeking suspension, under Article 14(9) of the Agreement for Cooperation, are exceptional circumstances limited to:

i) Either Party’s determination that continuance of reprocessing of U.S.-obligated nuclear material at the Facility would result in a serious threat to that Party’s national security, consistent with the Agreed Minute to these Arrangements and Procedures, or serious threat to the physical protection of the Facility or of the nuclear material at the Facility, and

ii) Either Party’s determination that suspension is an unavoidable measure.

4. Recognizing the critical importance of a decision to seek suspension, such a decision shall only be taken at the highest level of Government. As provided in Article 14(9) of the Agreement for Cooperation, the Party seeking suspension shall take into account the effects of such suspension on other aspects of cooperation under the Agreement for Cooperation. The Party seeking suspension shall also consider the effects of such suspension in light of the commitments and objectives, including full civil nuclear cooperation, contained in the U.S.-India Joint Statement of July 18, 2005.

5. The two Parties recognize that any suspension of these Arrangements and Procedures would have profound implications for the Agreement for Cooperation and for their relations. As such the two Parties shall exercise due restraint and caution before seeking suspension of these Arrangements and Procedures and shall use the provisions for consultations provided in Article 13 of the Agreement for Cooperation and in this Article. Such consultations shall also give special consideration to the importance for India of uninterrupted operation of nuclear reactors that provide nuclear energy for peaceful purposes and potential loss to the Indian economy and impact on energy security caused by a suspension of these Arrangements and Procedures. Both Parties shall take into account any negative consequences of such suspension on cooperation under the Agreement for Cooperation, including on-going contracts and projects initiated under the Agreement of Cooperation.

6. Subsequent to the above consultations, if either Party determines that exceptional circumstances do exist and that these Arrangements and Procedures should be suspended pursuant to Article 14(9) of the Agreement for Cooperation, that Party shall notify the other Party in writing providing reasons for the suspension. The Parties confirm that, as of the time of entry into force of these Arrangements and Procedures, there exists no objective evidence of any of the concerns specified in paragraph 3 of this Article.

7. Any decision to invoke the provisions of Article 14(9) of the Agreement for Cooperation shall be applied to the relevant reprocessing facility related to the exceptional circumstances to the minimum extent and for the minimum period of time necessary to deal with the exceptional circumstances and for not longer than a three month period unless extended by the Party seeking suspension for specific reasons conveyed in writing to the other Party. Both Parties shall review at the highest levels of Government, within three months from the commencement of the suspension, measures taken by the Parties aimed at reaching mutually acceptable resolution of outstanding issues, and steps taken to promote the earliest possible revocation of suspension, taking into account the effects of continuation of suspension on other aspects of cooperation under the Agreement for Cooperation. In case the suspension extends beyond a period of six months, both Parties shall enter into consultations on compensation for the adverse impact on the Indian economy due to disruption in electricity generation and loss on account of disruption of contractual obligations. The suspending Party shall notify the other Party in writing of a decision to end the suspension.

8. In the event of suspension of these Arrangements and Procedures the rights and obligations of the Parties under Article 14 of the Agreement for Cooperation shall remain unaffected.

ARTICLE 8 – CONFIDENTIALITY

1. If the Government of India, in carrying out its obligations under Articles 1(1)(e) and 4 of these Arrangements and Procedures, provides to the Government of the United States of America classified information concerning the physical protection of the Facility or nuclear material at the Facility, the Government of the United States of America shall protect that classified information against unauthorized disclosure in accordance with the terms set forth below and in accordance with the laws and regulations of the Government of the United States of America.

2. For purposes of these Arrangements and Procedures, “classified information” shall mean information provided by the Government of India pursuant to Articles 1(1)(e) and 4: (i) concerning the physical protection of the Facility or nuclear material at the Facility, the unauthorized disclosure of which could jeopardize the physical protection of the Facility or the material; (ii) which requires protection against unauthorized disclosure in the security interest of the Government of India; and (iii) which bears a security classification assigned by the Government of India. Classified information provided by the Government of India to the Government of the United States of America under these Arrangements and Procedures shall be marked by the Government of India in English as RESTRICTED, CONFIDENTIAL or SECRET.

3. Equivalent classifications are as follows:

INDIA UNITED STATES OF AMERICA

SECRET SECRET

CONFIDENTIAL CONFIDENTIAL

RESTRICTED CONFIDENTIAL (modified handling authorized)

4. To the extent consistent with its applicable national law and regulations, the Government of the United States of America shall seek to ensure that all classified information that is provided to the Government of the United States of America by the Government of India under these Arrangements and Procedures will not be publicly disclosed, and shall seek to accord appropriate protections to such classified information, with a view to providing the same level of protection as is accorded to such classified information by the Government of India. The Parties shall consult regarding the appropriate protection of such classified information.

ARTICLE 9 – INTERPRETATION

1. These Arrangements and Procedures are not intended to and shall not be interpreted to affect the terms of the Agreement for Cooperation, and in the case of any conflict between these Arrangements and Procedures and the Agreement for Cooperation, the terms of the Agreement for Cooperation shall prevail.

2. Terms used in these Arrangements and Procedures shall have the same meaning as given in the Agreement for Cooperation unless otherwise specified.

ARTICLE 10 – ENTRY INTO FORCE

These Arrangements and Procedures shall enter into force on the date on which the Parties exchange diplomatic notes informing each other that they have completed all applicable requirements for entry into force.

IN WITNESS WHEREOF, the undersigned, being duly authorized by their respective Governments, have signed these Arrangements and Procedures.

Done at __________________this ________day of ____________ 20__, in duplicate.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

FOR THE GOVERNMENT OF INDIA:

Agreed Minute

During the negotiations of the Arrangements and Procedures agreed between the Government of the United States of America and the Government of India pursuant to Article 6(iii) of their Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy (“the Arrangements and Procedures”) signed today, the following understandings, which shall be an integral part of the Arrangements and Procedures, were reached.

I. PHYSICAL PROTECTION AND STORAGE AT THE FACILITY

i) A consultations visit under Article 4.2 shall be held within six months of the initial commencement of operations at the Facility and thereafter once in every subsequent five year period. In special cases, consultations visits can also be undertaken by mutual agreement between the Parties.

ii) The purpose of the consultations visits is to provide an opportunity for both Parties to exchange views on the implementation of physical protection measures as specified in Article 4.1 as well as exchange of information on international best practices with respect to physical protection.

iii) During the consultations visits the following activities shall be permitted:

a. Initial meeting between the visiting team of not more than ten persons and the designated authorities of the Facility;

b. Observe the protected area perimeter and its access control points;

c. Visit to the central alarm station;

d. A pre-exit meeting between the visiting team and the designated authorities of the Facility to prepare and finalize a confidential joint report on the visit to the Facility.

iv) The consultations visits shall be:

a. undertaken to the Facility at a time and duration mutually agreed by the Parties taking into account paragraph (i) above;

b. Addressed in accordance with Article 12.3 of the Agreement for Cooperation.

c. Conducted in a manner consistent with the national laws and safety and security regulations in force and without causing hindrance to smooth operations at the Facility. Access within the Facility shall be restricted as appropriate by the designated authorities of the Facility in order to protect sensitive locations and equipment at the Facility as well as sensitive information. The use of equipment by the visiting team shall not be permitted.

II. Article 7: SUSPENSION OF ARRANGEMENTS AND PROCEDURES

The Parties, taking into account their relations of strategic partnership and the objectives and purposes of the Agreement for Cooperation, agree that with respect to implementation of Article 7:

i) the reference to “serious national security concerns” shall not mean or be the basis for:

a. addressing differences between the Parties on the nature of peaceful nuclear activities of either Party or activities covered by Article 2.4 of the Agreement for Cooperation;

b. addressing differences with regard to fuel cycle choices;

c. the purpose of securing commercial advantage; or

d. the purpose of delaying, hampering or hindering peaceful nuclear activities of the other Party.

ii) Suspension of the Arrangements and Procedures means suspension of reprocessing of U.S.-obligated nuclear material at the Facility.

iii) Suspension of operation of the Facility or part thereof by the Facility operator shall be in accordance with operating procedures so as not to jeopardize the safety, early resumption of operation of the Facility, and its continued operation in the future. Operations at the Facility with regard to non-U.S.-obligated nuclear material shall not be affected by suspension under Article 7. With respect to U.S.-obligated nuclear material, the principle of proportionality as included in the Agreed Minute of the Agreement for Cooperation shall apply.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA

FOR THE GOVERNMENT OF INDIA 

India’s nuclear-accident liability law: An anti-market bill that weakens safety

Kill the nuclear liability Bill

Low accident liability and legal immunity mean reactor builders will have perverse incentives for malpractices

Brahma Chellaney Mint March 11, 2010

The Civil Liability for Nuclear Damage Bill is an unparalleled piece of legislation: It aims to make foreign builders of nuclear reactors in India immune from legal action, however culpable they may be for a catastrophic accident. And it caps their liability at a ridiculously low Rs500 crore ($109 million) despite the billions of dollars in profit they are set to make. Yet, the government set the parliamentary process for the Bill’s consideration in motion under unusual circumstances—it circulated it to members on 8 March when Parliament was in turmoil over the women’s reservation issue.

Two issues stand out about the liability Bill. For one, it is an anti-market measure: It constitutes a generous Indian state subsidy to foreign firms. By seeking to shield foreign reactor builders from the weight of the financial consequences of severe accidents, the Bill shifts the main burden for accident liability from the foreign supplier to the Indian taxpayer.

Illustration: Jayachandran / Mint

For another, it weakens nuclear safety. After all, to grant foreign reactor builders legal immunity upfront and to turn their legal liability for an accident into mere compensation pegged at a pittance is hardly a way to advance nuclear safety.

Broadly, the anti-market features of the government’s proposed import of nuclear power reactors are manifold. First, the Bill seeks to help foreign firms cut their costs of doing business in India by requiring them to take accident liability insurance for a mere $109 million. The actual liability, according to the Bill, will be of the state operator, which will run foreign-built plants. The state operator, in turn, with make the foreign builder liable up to $109 million through the construction contract. Second, the government is merrily procuring land for foreign reactor builders. It has designated nuclear parks for foreign-origin reactors, reserving separate sites exclusively for US, French and Russian firms.

Three, reactor deals will be signed government-to-government without open bidding and transparency, just the way India has entered into contracts for US arms worth billions of dollars in recent years. Four, foreign firms are being freed from the task of producing electricity at marketable rates. The government will run the reactors through the state operator, subsidizing the high-priced electricity generated. And five, foreign suppliers will bask under legal immunity.

The liability Bill essentially is intended to help out the two US reactor exporting firms, Westinghouse and General Electric (GE) which, unlike their state-owned French and Russian competitors, are in the private sector. With India committed to importing at least 10,000MW of nuclear power generating capacity from the US, Washington has been zealously prodding New Delhi to enact the liability law. But in bending backwards to create a friendly business environment for US firms, the government is making the Indian taxpayer assume the principal financial burden in the event of a major accident.

Actually, the Bill symbolizes the latest in a string of conditions thrust on India under the much-trumpeted nuclear deal, which was approved by the US Congress in 2008 but whose nuclear energy benefits are unlikely to start flowing until nearly a decade from now, as the average global lead time for reactor construction has stretched to eight years. Under the deal, India got no legally binding fuel supply guarantee to avert a Tarapur-style cut-off, and no right to withdraw from its obligations under any circumstance, though the US has reserved the right for itself to suspend or terminate the arrangements if it holds India not to be in compliance with stipulated terms.

India is still negotiating with the US to secure the right to reprocess foreign-origin spent fuel under international inspection. The state department has notified the US Congress in writing, though, that “the proposed arrangements and procedures with India will provide for withdrawal of reprocessing consent” by the US.

Prime Minister Manmohan Singh had repeatedly promised to bring the nuclear deal to Parliament and “abide” by its decision. For example, he stated on 30 June 2008: “I have said it before, I will repeat it again, that you allow us to complete the process. Once the process is over, I will bring it before Parliament and abide by the House”.

Yet, no sooner had the process ended, than the government signed the 123 Agreement with the US, sidelining Parliament. Having given no role to Parliament on the main deal, the government now wants the two Houses to pass a special law to provide foreign companies with accident liability protection. In fact, as has been publicly revealed, the Bill was approved by the cabinet after the Prime Minister’s Office rode roughshod over objections raised by the finance and environment ministries to its provisions.

The Bill’s stated objectives and reasons seek to create the meretricious impression that it is designed to bring India in compliance with international nuclear liability instruments. The plain truth is that India is under no obligation to enact liability legislation. If India wants, it can follow the example of Russia, which has refused to pass legislation to waive or cap accident liability for its foreign suppliers. Or it can follow the lead of Germany, which has limitless liability and demands €2.5 billion ($3.4 billion) security from each plant’s operator.

Indeed, efforts to harmonize international rules on liability and compensation have been frustrated by the failure to bring all relevant international instruments into force. As the powerful World Nuclear Association—the lobbying arm of 180 nuclear firms, including GE, Westinghouse and Areva—admits, “States with a majority of the world’s 440 nuclear power reactors are not yet party to any international nuclear liability convention, relying on their own arrangements.”

Take the case of the US: It has its own domestic liability law, the controversial Price-Anderson Act, but it is not party to the main international instruments—the Vienna Convention of the International Atomic Energy Agency (IAEA) or the Paris Convention of the Organisation for Economic Cooperation and Development (OECD).

In 1988, to bridge the geographical scope of the Vienna and Paris conventions, a joint protocol was adopted. Then in 1997, another protocol amended the Vienna Convention to set the limit of the operator’s liability at not less than 300 million special drawing rights, or SDRs ($458 million).

The US has now become party to IAEA’s 1997 Convention on Supplementary Compensation for Nuclear Damage, or CSC, which recognizes the potential trans-boundary consequences of Chernobyl-type nuclear disasters, and thus seeks a common approach on compensation. Compensation is distinct from liability. CSC, as the name suggests, is about compensation, to be paid “supplementary” to the liability limit. To join CSC, a state must be party to the Vienna or Paris conventions, or certify that its national law complies with the CSC annex on liability. The supplementary compensation under CSC is to be provided through contributions by state-parties on the basis of their installed nuclear capacity and a United Nations rate of assessment.

The Indian government has misleadingly juxtaposed its liability Bill with CSC, which has not even entered into force.

In theory, the Bill seeks to emulate the Price-Anderson Act, the US system of indemnification for legal liability. But in reality, it picks the worst elements from both worlds—the US system and IAEA’s Vienna Convention.

The Vienna Convention has no upper ceiling on liability, only a minimum one (300 million SDRs, also reflected in CSC). But the minimum is so low that few countries have pegged liability to that level. For example, Japan’s operator liability now is 120 billion yen ($1.33 billion), while liability in Finland is unlimited, with each plant licensee required to take at least €700 million ($950 million) in insurance coverage.

The Price-Anderson system, for its part, provides for more than $10.5 billion in liability payouts for each disaster through a complex formula that includes insurance coverage carried by the reactor that suffered the accident, retrospective premiums from each of the operating reactors in the US, and a possible 5% surcharge. The US government assumes liability for any accident only above the $10.5 billion figure, which is inflation-adjusted every five years and thus variable.

The Indian Bill, by contrast, pegs maximum liability, as its clauses 6 and 7 state, at “the rupee equivalent of 300 million SDRs”, or Rs2,087 crore ($458 million)—that is, 23 times lower than the private-sector fund available under the Price-Anderson system. Of this, the total possible liability of the foreign supplier has been limited to a trifling Rs500 crore. The Union government will be liable for damages in excess of Rs500 crore but up to Rs2,087 crore.

The Price-Anderson Act—effectively a subsidy measure—has been severely criticized by independent groups in the US, where it has been mockingly called “Half-Price Anderson”. The legislation the Indian government is seeking to push through can be labelled “Free-Ride Anderson”. Under it, the reactor builder is free to rake in unlimited profits without a real liability on product safety.

What is worse is that while the Price-Anderson Act permits economic (but not legal) channelling of liability, thereby allowing lawsuits against any party, the Indian Bill grants foreign suppliers immunity from legal action by introducing legal channelling of all liability to the Indian government. It not only turns the “polluter pays” principle on its head, but also forecloses the possibility of victims suing the foreign reactor builder for additional damages even in Indian courts.

With the improvement in reactor safety systems, chances of a nuclear accident are admittedly low. But the consequences of a single nuclear accident would be colossal, with a serious radioactive release likely to cause lasting public health problems, including genetic damage passing on to future generations. Though it did not kill anyone, the 1979 partial core meltdown at the Three Mile Island nuclear plant in the US led to 14 years of clean-up costing at least $1 billion. Little surprise that Washington has been pressing New Delhi hard on the liability issue.

More fundamentally, creating an artificial market with open-handed subsidies, land acquisition for foreign firms, abysmally underrated accident liability, and electricity supply at state-supported rates is no way to meet energy needs, or to reduce carbon emissions, or to help India’s poor. The Bill should be seen for what it is—an anti-market measure designed to promote unfair business practices and cartelization by rigging commercial terms in favour of select foreign suppliers.

Indeed, the Bill sends out a jarring message: Indian lives are cheap. It is a message at odds with India’s pride in being the world’s largest democracy.

Brahma Chellaney is professor of strategic studies at the Centre for Policy Research in New Delhi. Comment at theirview@livemint.com

Copyright © 2010 HT Media All Rights Reserved

Nuclear-accident liability

Ignoring lessons of Bhopal and Chernobyl

BRAHMA CHELLANEY 

The government’s nuclear-accident liability bill seeks to burden Indian taxpayers with a huge hidden subsidy by protecting foreign reactor builders from the weight of the financial consequences of severe accidents.

The Hindu newspaper, February 16, 2010

The vaunted civil nuclear deal with the United States came into effect in 2008, with the U.S. Congress attaching a string of conditions to the ratification legislation, the Nuclear Cooperation Approval and Non-Proliferation Enhancement Act (NCANEA). The Indian Parliament was allowed no role to play, not even to examine the deal’s provisions. But having sidelined Parliament on the main deal, the government now wants it to pass a special law to provide foreign companies with liability protection in case of nuclear accidents. Such a law has been demanded by U.S. firms, which, unlike their state-owned French and Russian competitors, are in the private sector.

It is important to remember that the promises on which the deal was sold to the country have been belied, one by one. For example, Prime Minister Manmohan Singh had exulted in 2008 that the deal “marks the end … of the technology-denial regime against India.” Yet, just last month, his Defence Minister conveyed to U.S. Defence Secretary Robert Gates India’s “concerns regarding denial of export licences for various defence-related requirements of the armed forces” and other “anomalous” technology restrictions.

After the 123 Agreement was clinched, Dr. Singh told Parliament in 2007 that an “important yardstick has been met by the permanent consent for India to reprocess.” But in 2010, India is still negotiating with the U.S. to secure a right to reprocess spent fuel. The U.S., in any event, has no intention of granting India “permanent consent,” with the State Department having notified Congress that the proposed arrangements with India “will provide for withdrawal of reprocessing consent.” 

The biggest fiction, of course, was to present the deal as the answer to the country’s burgeoning energy needs. Nuclear energy cannot be a reasonable solution for any country because plants take too long to build and cost far too much. The first plant to be set up under the deal is likely to generate electricity, in the rosiest scenario, not before 2016.

In a more-plausible scenario, the timeline may stretch up to 2020, given the three reactor-exporting countries’ record. While the U.S. has built no plant in many years, Russia is still struggling to complete its much-delayed twin reactors in Kudankulam, India. As for France, its two new plants under construction, one in Finland and the other at home, are billions of dollars over budget and years behind schedule.

The bigger question, which New Delhi consistently has shied away from discussing, is about the cost of electricity from foreign-built reactors. India’s heavily-subsidised indigenous nuclear power industry is supplying electricity at between 270 and 290 paise 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 taxpayers, even as the reactor imports lock India into an external-fuel dependency.

To compound matters, the government’s Civil Liability for Nuclear Damages Bill, proposed to be introduced in the upcoming Parliament session, amounts to yet another tier of state subsidy, even if a hidden one. The bill is designed to shield foreign-reactor builders from the weight of the financial consequences of severe accidents. It shifts the primary burden for accident liability from the foreign builders to the Indian state. Although its text has not yet been made public, the bill is said to cap total compensation payable in the event of a severe radioactive release at Rs. 2,250 crore ($483 million), with the liability of the foreign supplier restricted to a trifling Rs. 300 crore ($64.6 million).

That represents an Indian taxpayer subsidy to foreign firms to help slash their cost of doing business in India. Each foreign reactor will carry a price tag of several billion dollars. Given that India has agreed to award contracts specifically to U.S., French and Russian firms, each such foreign supplier is expected to build more than one twin-reactor plant. India indeed has agreed in writing to import at least 10,000 megawatts of nuclear power-generating capacity from the U.S. alone. While each such firm stands to rake in billions of dollars in profit from the Indian market, its accident liability is being capped virtually at a pittance.

The partial core meltdown almost 31 years ago at the Three Mile Island nuclear plant in Pennsylvania didn’t kill anyone, but it led to 14 years of clean-up costing $1 billion. Despite India’s own bitter experience over the Union Carbide gas catastrophe at Bhopal, the government wants the Indian taxpayers to carry the can for foreign reactor builders. Why cap liability on terms financially prejudicial to Indian interests?

Worse still, India — instead of facilitating open market competition — is seeking to protect foreign firms from the market. From procuring land for them for reactor construction to freeing them from the task of producing electricity at marketable rates, India is doing everything to rig the terms of doing business in their favour. By designating nuclear parks for foreign-built reactors, the government has reserved reactor sites exclusively but separately for the U.S., France and Russia. In the same way it has signed billions of dollars worth of arms contracts in recent years with the U.S. without any competitive bidding and transparency, New Delhi is set to award nuclear contracts on a government-to-government basis.

India’s nuclear-accident liability bill aims to help replicate what U.S. nuclear firms presently enjoy in their domestic market, where the Price-Anderson Act caps the industry’s liability for a severe radioactive release. But for each accident, the Price-Anderson liability system provides more than $10.5 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 5 per cent surcharge. Washington assumes liability for any catastrophic damages from an accident only above the $10.5 billion figure (which is inflation-adjusted every five years and thus variable).

Why should a poor country like India assume liability from a ridiculously low threshold? In fact, to cover claims of personal injury and property damage in the event of a catastrophic nuclear accident, India — given the density of its population and the consequent higher risks — must also maintain a large standby compensation pool, but without the state being burdened.

Another troubling aspect of the proposed Indian legislation is that while the Price-Anderson Act permits economic (but not legal) channelling of liability, thereby allowing lawsuits against any party, New Delhi is granting foreign suppliers immunity from legal actions — however culpable they may be for an accident — by introducing legal channelling of all liability to the Indian state (which will run the foreign-built plants through its Nuclear Power Corporation of India Limited). What will it do to nuclear safety to free foreign suppliers upfront from “the precautionary principle” and “the polluter pays principle” and turn their legal liability for an accident into mere compensation, that too at an inconsequential level?

To be sure, without a cap on liability damages in India, U.S. firms would be exposed to unlimited liability. But in its effort to help create a congenial environment for them to do business in India, should the state gratuitously assume the principal financial burden in the event of an accident? The proposed Indian cap is well below international levels. Japan, for example, has boosted its plant operator liability to120 billion yen ($1.33 billion). Under the OECD’s 2004-amended Paris Convention, total liability was set at €1.5 billion ($2.04 billion), with the operator’s share being nearly half. Germany, for its part, has unlimited operator liability and demands € 2.5 billion ($3.4 billion) security from each plant’s operator.

After the 1986 Chernobyl disaster, with its transboundary consequences, international efforts were initiated to harmonise rules on liability and compensation. But those efforts have been stymied by the failure to bring all relevant international instruments into force. States with a majority of the world’s present 436 nuclear power reactors are not yet party to any international liability convention. Many countries still maintain a “wait and see” approach. For example, China, Japan and the U.S. are not party to any international liability convention, while Russia — a party to the Vienna Convention since 2005 — has refused to pass legislation to waive or cap accident liability for its foreign suppliers. China has yet to erect a formal domestic liability regime, although its State Council in 1986 issued an administrative legal document as an “interim” liability measure.

When a number of nuclear-generating countries are yet to adopt domestic legislation in this field, let alone ratify international conventions, why is New Delhi in a rush to pass a bill that caps liability on terms weighted in favour of foreign suppliers? Parliament indeed should seize the opportunity offered by the liability bill to scrutinise the nuclear deal in its entirety.

(c) The Hindu, 2010.

Prime Minister returns with little from Washington

A deal gone sour

Brahma Chellaney
DNA newspaper, November 27, 2009

The ritzy state dinner US President Barack Obama hosted in honour of Indian Prime Minister Manmohan Singh at the White House could not obscure the fact that Singh’s visit yielded little in substance. The elaborate pomp and ceremony also did little to change perceptions in India that it has lost ground in America’s Sino-centric Asia policy. During the presidency of George W Bush, many in India had whipped themselves into rapturous frenzy over what they saw as a tectonic shift in US policy toward India. All it required to shatter their bliss (and belief) was a change of government in Washington.


The lesson: Unlike India’s personality-driven, sentiment-laced approach, US foreign policy is shaped by institutional processes that preclude abrupt U-turns or shifts. To be sure, Bush was India-friendly. But he left office without translating his thinking into concrete policy guidance to various departments to treat India as a strategic priority. In the absence of a national security directive to the powerful State Department, Pentagon and Commerce Department bureaucracies that run day-to-day aspects of India policy, the vaunted Indo-US nuclear deal has failed to deliver tangible strategic benefits, or even to promote joint defence research and development. US export controls on high technology continue to target India like before.

The developments since 2008 actually hold the most-sobering lesson for Singh, who staked his political reputation to push through the nuclear deal. He peddled the deal as a transformative initiative that would help put the Indo-US relationship on a much-higher pedestal. But more than a year after the deal came to fruition there is no sign of its transformative power. Rather, India now is concerned about its diminished role in US foreign policy. Despite a much-celebrated strategic partnership between the world’s most-populous democracies, the US values India more as a market for its goods and services than as a collaborator on pressing strategic issues. Indeed, just as it has been balancing its relationships with India and Pakistan for long, Washington now is balancing its ties with India and China.

The nuclear deal itself is turning sour. It will take a decade or so before the first imported nuclear-power reactor begins to generate electricity. The economics of generating power from imported reactors hasn’t even been discussed. Costs are likely to be so high as to saddle Indian taxpayers with a major subsidy burden. Two nuclear-power plants currently under construction in Finland and France are billions of dollars over budget and years behind schedule.

Despite a strong US push to bag major reactor contracts and New Delhi’s action in reserving two nuclear parks exclusively for American firms, no reprocessing agreement could be clinched during Singh’s visit. Key differences remain over such an agreement, which would have to pass US congressional muster. Singh went to Washington after getting his Cabinet to approve a nuclear-accident liability bill, which seeks to cap liability at a mere $537 million (Rs2,500 crore) and makes the Indian state-run operator, rather than the foreign supplier, liable for compensation payment. Parliament must seize the opportunity when this bill is tabled to examine in full the nuclear deal, which thus far has escaped legislative scrutiny in India. The bill — intended to provide cover mainly to US firms, which, unlike France’s Areva and Russia’s Atomstroyexport, are in the private sector — seeks to further burden Indian taxpayers, rather than put the onus on the sellers of multibillion-dollar reactors.

If anything, Singh’s visit was a reminder that Obama’s tilt towards China on key Asian issues and growing US reliance on and aid for Pakistan have emerged as major sticking points in the Indo-US relationship. The policy frame in which Washington is viewing India is not the larger Asian geopolitical landscape, but the southern Asian context. But even on regional matters, the US has on occasion sought to pursue approaches antithetical to India’s vital interest. Also, at a time when Sino-Indian border tensions have escalated, Washington has failed to even caution China against any attempt to forcibly change the territorial status quo.

But more than Washington, New Delhi is to be blamed. The deal-peddlers in India allowed their wishful thinking to blind them to the strategic trends that were firmly set long before Obama came to the White House. Take the China factor. Bush left office with a solid China-friendly legacy, best illustrated by the manner in which he ignored the Chinese crackdown in Tibet and showed up at the Beijing Olympics. The talk of a US-China diarchy — a G2 — ruling the world had begun before Obama was elected. It was also under Bush that the US renewed its aid to Pakistan on a massive scale, while pressuring India not to take the mildest diplomatic sanctions against Islamabad after 26/11. Clearly, the deal was oversold.

The writer is Professor Strategic Studies, Centre for Policy Research, New Delhi.

http://www.dnaindia.com/opinion/main-article_a-deal-gone-sour_1316954