The promise of nuclear deals

“The deal is done” announced foreign secretary Sujatha Singh after a long discussion between Mr. Obama and Mr. Modi over resolving the logjam in operationalising the much touted Indo-US nuclear deal or the 123 Agreement. Much excitement and optimism has been pouring in from across media houses about the significance of the deal and its implications for India.

In this post, we begin with a general discussion on nuclear energy for civilian purposes and its prospects. In that backdrop, we will try to analyse what this deal is exactly about, what were the hurdles in implementing it till now, and the implications of the deal for our country.

The potential of nuclear energy

Coal based thermal power plants account for 67% of our power generation. Domestic reserves of oil and natural gas are inadequate and their import is a huge burden on government finances. In this scenario along with the global thrust on mitigating carbon emissions, renewable energy and nuclear energy have emerged as promising sources for global energy needs. To give you an indication of the high efficiency of nuclear power, the fission of 1g of Uranium-235 evolves energy of the order of 1MW per day. On the other hand, 2.6 tons of coal must be burnt for a similar output in a coal based thermal power plant.

The Indian scenario

India aims to supply 25% of electricity from nuclear power by 2050. This is presently below 5%.


Our indigenous nuclear power programme initiated with the establishment of BARC under the guidance of the visionary Homi J. Bhabha has made India largely self-sufficient in nuclear technology – whether it is uranium exploration and mining, heavy water production, reactor design and construction, waste management. The only problem we face is the availability of uranium – the fuel that powers nuclear power plants. India has negligible uranium reserves. This is why we need nuclear deals with other countries in the first place – to be able to trade in nuclear fuel.

Civil Nuclear Deals

India and US announced their intention to enter into a nuclear cooperation agreement in 2005. Dr. Manmohan Singh risked the survival of UPA-I on the pact and barely survived a confidence vote in Parliament.

But India has not signed the Nuclear Non-Proliferation Treaty (NPT). Now there exists a sort of a club of the world’s nuclear trading nations called the Nuclear Suppliers Group (NSG). Its guidelines prohibit nuclear trade with a country that is not signatory to NPT. In 2008, India won a crucial exemption from this arrangement making India the only known country with nuclear weapons which is not a party to the Non-Proliferation Treaty (NPT) but is still allowed to carry out nuclear commerce with the rest of the world. US invested a lot of political capital lobbying for India at NSG. This was done in the hope that it would provide a huge market to US’s nuclear energy companies in India. India promised 10k MW worth of contracts to the US for its help.

The waiver from the NSG and the Indo-US deal has allowed Russia, France and Australia to also sign key nuclear deals with India.

The stumbling block – India’s Liability Law

The Indian Parliament then passed the Civil Liability for Nuclear Damage Act, 2010. This law has since stalled the implementation of the deals with the US, Russia and France.

Why the huge opposition from around the world?

  • In the event of a nuclear accident, the law allows the operator of the nuclear reactor – which will be NPCIL in India’s case to shift the liability in terms of compensation, etc. to the supplier in case it is found that the accident happened because of faulty equipment provided by the supplier. This is contrary to international practice which channels liability exclusively to the operator.
  • Foreign nuclear energy companies say that this will make it difficult for them to get insurance because of the potentially unlimited liability. Even if it is available, the cost of energy produced will be prohibitively high.

Why India should stick to its stand despite the global norm?

  • Fukushima disaster and the Three Mile Island disaster both had an element of supplier negligence. In the Fukushima case, the weak design gave in to the tsunami and in the Three Mile Island case, the supplier was aware of the design defects that contributed to the accident but did not resolve them.
  • Both examples show that the supplier will be willing to take more risks in case of no liability.
  • Similarly, the Bhopal Gas Tragedy suffered by India, though not nuclear, but one of the biggest industrial disasters was also caused partly due to faulty equipment.

When the global norm is itself unjust, India has good reason to depart from it.

Resolving the deadlock

While the details of exactly how the issue has been resolved are not yet public, most reports point to creation of an insurance pool provided by public sector insurance companies like General Insurance Company, etc. as well as the central government thus distributing risk among different bodies. This insurance pool will cover the maximum supplier liability – INR 1500 crores – in case of an accident.

A word of caution

While we hail the deal as heralding a new era in Indo-US relations and a significant measure for our energy security, a word of caution is in order.

The reactors that the US has offered to sell are both expensive and have untested designs. The Westinghouse AP100 for Mithi Virdi (Gujarat) is not in commercial operation anywhere in the world and has encountered various difficulties wherever it has been built. Similarly, GE’s Economic Simplified BWR (ESBWR) for AP has just received regulatory approval in the US in 2014. There are no firm orders for it till now.

And lastly the Indian government’s focus on nuclear energy has to be evaluated in the global context of the nuclear industry in general. There has been a general slowdown in the industry. Obsession about safety post Fukushima has raised questions over nuclear energy being a safe and clean option. The issue of storage of spent nuclear fuel which is increasing by 2k-3k tonne/year is another big challenge. There have been mass protests against the French-backed Jaitapur Nuclear Power Project in Maharashtra and the Russian-backed Kudankulam Nuclear Power Plant in Tamil Nadu.

We need to tread carefully before committing to a future nuclear powered India where the threat of disaster looms large. The Bhopal gas tragedy is a grim reminder of the potentially irreversible and long term consequences of an industrial disaster.

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