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A Secondary Role for U.S. in India’s Nuclear Future

By Rama Lakshmi
Washington Post Foreign Service
Tuesday, September 2, 2008; A12

NEW DELHI — Four months before India shocked the world by conducting underground nuclear tests in 1998, French President Jacques Chirac visited India, bringing along 100 business leaders and meeting with Indian p olicymakers and industrialists.

At one meeting, Chirac surprised the Indians: “He said, ‘France would fully understand if India conducted nuclear tests. We will be with you,’ ” recalled Tarun Das, chief mentor of the Confederation of Indian Industry, a business lobby that received the French delegates.

France has a long history of working closely with India’s nuclear industry, as does Russia, Das noted. But American nuclear companies have been unable to do business in India since 1974, when trade restrictions went into effect after New Delhi tested its first atomic device.

Now, a historic civilian nuclear deal between India and the United States will allow American companies to return and will lift restrictions on other countries’ sales of nuclear technology and fuel to India.

France and Russia “come at the head of the queue for business contracts from the nuclear deal now,” Das said. “But let us not forget it is a very, very long line behind. And Americans and others are the long line behind.”

Beyond shrill political statements, climate change and proclaimed foreign policy triumphs, the nuclear energy agreement is also about business worth more than $100 billion over about two decades and potentially tens of thousands of jobs in the United States and India. American companies hope to get a sizable slice of the Indian nuclear pie and land big contracts in defense and aerospace.
The accord is on track to be approved this week by the 45-country Nuclear Suppliers Group, which governs the world’s trade in nuclear materials.

But many officials and experts in both countries say that even after the political and diplomatic hurdles are cleared, contracts for U.S. companies will not be given out immediately. The first round of contracts after the suppliers group’s approval will probably go to France and Russia, they say. A delay in U.S. ratification of the agreement, a lack of liability laws in India and the disquieting memory of severed nuclear ties would probably slow things down for the Americans.

Because of a severe shortage of uranium, many of India’s 17 nuclear reactors are operating at 40 percent of capacity. About 30 reactors are expected to be built by 2030 in the energy-starved country.

Nuclear experts in India and the United States say India has given informal approval to government-owned companies in Russia and France to build six to eight reactors in the near term.

“It is not right to say that France and Russia have been given the sites for reactors. But it is not wrong either,” said Sudhinder Thakur, executive director of the Nuclear Power Corp. of India, a state-owned company that has a monopoly on nuclear power generation in India. “It is known that we have commenced preparatory work of land acquisition and infrastructure building at four places. We have enjoyed long-term cooperation with Russians and French.”

When some American delegations asked for a similar declaration of support, India would give only verbal assurances. Such agreements with American firms would have been politically inflammatory in India because of opposition to the nuclear deal based on Cold War-era wariness toward the United States.

Meanwhile, American energy heavyweights such as General Electric are losing the critical competitive edge of time to France’s Areva and Russia’s Rosatom as the deal awaits ratification by the U.S. Congress. GE built and helped run India’s first nuclear plant at Tarapur, near Mumbai, but pulled out in 1974.

But perhaps the biggest barrier for the Americans is the lack of clear nuclear liability laws in India in the event of an accident.

“Our nuclear industry was in the government sector until now. And we did business with other government companies in Russia and France. Decision-making, regulatory processes were not transparent at all,” said V. Raghuraman, principal energy policy adviser at the Confederation of Indian Industry, which spearheaded advocacy for the deal.

American business delegations to India have repeatedly said that unless protected under liability laws, U.S. companies would find it impossible to sell reactors in India.

“American companies are always concerned about lawsuits in U.S. courts and liability issues,” said Omer Brown, a lawyer working to promote a new international legal framework for nuclear incidents, called the Convention on Supplementary Compensation. “It is more of an issue for American private nuclear companies. State-owned French and Russian nuclear companies, which have sovereign immunity, can walk away and pay nothing.”

The convention is meant to cover nuclear accident claims and provide a global fund to pay victims. It will activate after five or more countries, collectively having 400,000 megawatts of installed nuclear capacity, ratify it with the International Atomic Energy Agency. Four have done so — the United States, Morocco, Argentina and Romania, with a total of 319,256 megawatts.

“Liability limitations remain very important for private sector companies operating in this area,” said Karan Bhatia, a vice president for international government relations and policy at GE. In the company’s view, India’s ratification of the compensation convention and adoption of domestic legislation “would be the optimal way forward,” Bhatia said.

Indian officials have agreed to study the proposal. But with a national election scheduled in a few months, the matter could spill over to the next government.

The volume of business opportunities for Americans is expected to swell when an Indian law prohibiting private companies from generating nuclear energy is amended. Large Indian corporations are exploring ties with U.S. and French companies to eventually secure contracts for constructing nuclear power stations and generating power, or for producing components such as generators and turbines.

But India aspires to become more than a mere market for foreign players in the nuclear industry. The country hopes to position itself as a low-cost manufacturing hub that supplies nuclear components to the world. Officials here say they also want to provide manpower to nuclear projects and help other countries decommission and upgrade old nuclear plants.

India’s traditional way of doing nuclear business is also proving to be a challenge for some American companies. Indian nuclear plants have always preferred to procure nuclear fuel, the reactor and technology from a single vendor. This model worked with the Russians and the French, because nobody else wanted to conduct nuclear trade with India.

“The Indian mind-set has to be weaned out of this practice. We are trying to convince them that it is a lot cheaper to work with more than one vendor and buy them separately,” said Vijay Sazawal, director of government programs at USEC, a Maryland-based supplier of enriched uranium fuel.

But Sazawal said he would not wait until the laws are amended and mind-sets change. His company is negotiating with a French nuclear power company, EDF, for business possibilities in India.

“There is a legacy of residual distrust from three decades of technology denial by the U.S.,” said K. Santhanam, a defense expert who has worked in India’s nuclear program. “So in the first stage, the U.S. industry can play a sub-vendor role to French reactors or join in a consortium with French companies. After all, the French will not allow Americans to run away with the lion’s share.”

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