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18 February 2015

US-India Civil Nuclear Deal - The Day After

By Monish Gulati 
February 16, 2015 

Abstract: The article evaluates the steps taken to resolve the logjam over the US–India Civil Nuclear Agreement of 2008 prior to the visit of US president to India in January 2015.

After US President Barack Obama and Prime Minister Narendra Modi met in New Delhi on 25 January 2015, four key deliverables from the summit meeting were identified to be in the areas of nuclear energy, defence, climate change and the economy. However the centrepiece of the visit, as per analysts and commentators, was the breakthrough on the nuclear civilian deal which was proving to be a major impediment (and irritant) to cooperation between the two countries. The US–India Civil Nuclear Agreement or Indo-US nuclear deal basically allows India access to nuclear technology and fuel without giving up its nuclear weapons programme. This article examines some aspects of this deal.

The Breakthrough

At the joint press conference after his meeting Modi said in reference to the nuclear deal that “I am pleased that six years after we signed our bilateral agreement, we are moving towards commercial cooperation, consistent with our laws (and) international legal obligations." Some media reports on the other hand felt that the two leaders had “unveiled a deal aimed at unlocking billions of dollars in nuclear trade.” A more nuanced analysis would point to a state somewhere in between the two statements.

The two nations post their current agreement are indeed “moving” towards commercial cooperation on nuclear energy technology but what they have conclusively achieved at present is to move “ahead” of the 2008 civilian nuclear technology agreement in the government to government bilateral partnership and cooperation. The log-jammed 2008 agreement had become a symbol of US overreach to India on one end and India’s failure to match the effort on the other. Thus this strategic hold-back has been addressed (through political intervention) but the commercial potential of the deal is yet to be realised.

The road to the resolution of the log-jam passed through three rounds of dialogue (last of which was held in London recently) by a bilateral contact group, constituted after the visit by Modi to US in September 2014. The sticking points had been the US insistence on tracking of fissile material being used in the nuclear plants and liability of the nuclear equipments supplier of these nuclear plants in case of an accident.

Nuclear Liability

The two countries had in 2008 signed the landmark US–India Civil Nuclear Agreement however its operationalisation was held up due to USA’s concerns over India's Civil Liability for Nuclear Damage Act (CLNDA) passed in 2010. With the 1984 Bhopal gas tragedy still fresh in India's mind the parliament in CLNDA had passed a law that makes equipment suppliers ultimately responsible for an accident; which was a deviation from international norms which rested the liability on the operator of the nuclear power plants. Incidentally the domestic vendors for the indigenous PHWR reactors have also expressed similar concerns regarding CLNDA.

The concerns of the international suppliers that arise from provisions are in Section 17 (b) and Section 46 of the CLNDA. The liability (under section 17) is capped, as is the case in all nuclear liability regimes, as per Section 6 of CLNDA at Rs 1500 crores (subject to review). The Central Government is liable for any compensation/damages beyond the capped amount. Section 46 on the other hand has been seen to expose the nuclear suppliers to potentially unlimited amounts of liability under ordinary principles of tort law.

Few details are available on how the impasse had been broken. Reportedly India will set up an insurance pool (a risk transfer mechanism) led by General Insurance Co and four other insurance companies of a total amount of Rs 750 Crore to indemnify companies that build reactors in the country against liabilities in case of a nuclear accident under CLNDA. The remaining Rs 750 Crore of the total Rs 1,500 Crore to offset liabilities will be provided by the government of India. This will address US concerns over section 17 while Attorney-General Mukul Rohatgi will address US concerns over section 46 by way of a MoU.

Tracking Clause

USA’s insistence on acquiring tracking rights perpetually over nuclear material, even which was sourced from third countries for use in reactors supplied by its companies, over and above inspections by the International Atomic Energy Agency (IAEA) was the second major sticking point in the deal. India’s stand was the US demand was intrusive, specifically since India had acceded to IAEA safeguards. Post negotiations it is understood that the US is no longer insisting on "flagging" or tracking the nuclear material supplies to India as required under its rules to ensure this is not being used for military purposes.

Strategic Context

It is largely believed by the global community that nuclear energy and the deal itself, was a convenient cover for releasing India from global denial of dual-use technology. The ultimate aim was to make India a full member of the four technology-control regimes ie Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement and the Australia Group. Therefore alongside progressing their nuclear deal, India and the US during the last two summit meetings have committed to continue to work towards India's phased entry into these four technology-control regimes.

Even though China, a day after US President Barack Obama backed India's inclusion into the elite 48-member NSG, has extended conditional support for India's membership bid saying that "prudence and caution" needs to be exercised on the issue, the road to the NSG membership will come with costs. Chinese Foreign Ministry Spokesperson Hua Chunying at the media briefing added that “We support the group to include new members and we support India to take further measures to meet the requirements for the inclusion in the group." This is probably China’s indication that India’s membership will be along with Pakistan, whose nuclear energy programme is being “grand-fathered” by China.

Notwithstanding politics and the distance the Indo-US nuclear deal has yet to cover, It was the US President who has best described it when he said the agreement on the nuclear deal represented a “new and perhaps unprecedented opportunity” for deepening of Indo-US ties.

The author is a Senior Fellow and Associate Director (Strategic Affairs), Society for Policy Studies, New Delhi. Views expressed are personal. 

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