Published On : Fri, Feb 13th, 2015

India-U.S. nuclear deal – a sell out under the guise of a breakthrough?

New Delhi/Nagpur: “While the government may continue to say that the Civil Liability for Nuclear Damage Act remains untouched, it’s the government’s reading of that law which is problematic; especially as it is around an issue which concerns every Indian: as an energy consumer, a tax payer, and a potential victim of a nuclear accident” Suhasini Haider, Hindu.
Kudos to the ‘Hindu’ for coming out with a bold and investigative write up that throws light on what terms the deal seems to have been finally cut at – and questions whether it is truly a ‘breakthrough’ or a ‘no big deal’.

That India needs to be a nuclear power generating nation is not debatable at all – pretty soon we are going to overtake China in our energy requirements and coal based thermal power just isn’t going to cut it. Beside, it is very polluting and ecologically damaging; not that these are two issues that exert our policy makers too much these days. But it is still a given that even if our coal miners meet the impossible coal extraction targets being set for them, enough thermal power isn’t going to be generated. The country has to depend on other sources of which nuclear power seems the most attractive and available option.

Our scientists have been working towards this goal since decades, that is one of the main reasons we have been doing research on nuclear fission and went in for our first nuclear blast on a trial basis at Pokharan, Rajasthan ironically when another BJP politician was at the helm. But this act, while proclaiming that we were a nuclear nation now, had us ostracized from the nuclear club on whom we would have had to depend for nuclear fuel. We were cut out from other largesse too.

This embargo was finally broken when Bush and Manmohan Singh put their heads together and India and USA finally had a nuclear deal. But the execution still hinged on two issues – the inspections and audits that India would have to allow of her nuclear facilities and the liability that American suppliers were willing to bear in case of mishaps.

Though precious time was lost in solving this connundrum it was still a vital issue. Two world events underlined its importance. First, in 2011, a tsunami off the coast of Japan led to a physical disruption that caused a melt down at the Fukushima nuclear reactor plant. As is known there were horrendous Japanese casualties then – how many due to the natural disaster and how many due to nuclear radiation has still not been quantified. Doing so would have affected the immediate compensation that was given out. By 2014 various estimates put the damages and clean up between $100 – 250 billion.

The second event was something that happened in the same year some months later. The U.S. government joint investigation team on the BP ” deep water Horizon” a huge oil spill off the coast of Mexico found not just the operator BP liable for damages but also the designers and the manufactureres of other supplementary equipment. In all 3 companies were held liable and had to bear cost of compensation.

In the case of nuclear mishaps the figures of loss and damages would be exponentially higher and it was necessary to make each component in the supplier chain liable internationally.

In 2010, the Civil liability for Nuclear Damage Act had capped all liability to 300 million special drawing rights (SDRs) which was $420 million or Rs. 2610 crores. This figure was arrived at after much debate but in retrospect given the two world events mentioned above should have been far higher. Arun Jaitley who was then Opposition leader had later written an article called the “hidden hand of nuclear vendors” and accused the then UPA Govt. of not looking after the country’s interests.

But now, when he is in power it is apparent that at every stage of the nuclear process, the government of the day has negotiated to minimise the liability of the supplier – who could be American, European or even Indian.

After the last rounds of the ‘breakthrough’ negotiations, the Ministry of External Affairs MEA has put out an explaination that only seeks to reduce the liability that suppliers will face. The answers to Frequently Asked Questions (FAQs) given out by the MEA seem to be aimed at easing concerns of the suppliers rather than assuaging the fears and doubts of the Indian consumer. Under its explanation of section 17 ( question 9 ) for instance, it says the law “permits but doesn’t require an operator” to make the supplier liable in its contract for a nuclear reactor or part. It also says that a supplier can be sued for damages only “if it is expressly provided for in a contract in writing”. What supplier would feel obliged to sign for a liability in a contract if it isn’t ‘mandatory?’ While the FAQ mentions that the state run NPC would “insist” on such a clause the main point is that it is not mandatory. And what happens if a private player finalizes the deal or tommorow NPC itself is privatized is not explained.

Next and more damagingly, the MEA release does away with the right of recourse of a victim to sue the suppliers in India directly as well as in a “class action suit” in foreign courts where it says that section 46 of the the tort law does not create the grounds for victims to move foreign courts.

So who pays and how in the case of a mishap that will most certainly affect the Indians solely – a la Bhopal.
The MEA has spelt out a “Nuclear Insurance pool” for the Rs. 1,500 crore that is the minimum required to be set aside as per the law. The pool will be made up of government and state owned insurers administered by the General Insurance Corporation of India. In the case of an eventuality the pool will be used to immediately pay compensation to the affected. The government would be liable for an additional Rs. 1,110 crore after which the international fund would bear residual damages. (Applicable only after India has ratified the CSC- Convention on supplementary Compensation for Nuclear Damage – 1997.) The supplier, it is made amply clear, will pay nothing but a nominal premium to the insurance pool, which no doubt he will build into the cost of supplies.

So ultimately, directly or indirectly, the Indian consumer will pay for the entire cost of the project and partly for a large chunk of the compensation and insurance cost as well. Not to mention legal costs if the Govt has to get into litigation.

As Suhasini Haider puts it succintly: ‘The real problem then is that nothing is ‘simply put’ in the nuclear debate. Instead clever, complicated and arcane language has been used to confuse the consequence to the consumer”.

This the real breakthrough that has been achieved by the same players on both sides negotiating over the same law which in sum total has now lost teeth and seems like a paper tiger that no supplier has to fear.