The media focus on the Indo-US Nuclear Deal during US President Barack Obama's recent visit to India was intense; not just TV hosts and 'expert' panelists, even children and grandparents were talking about the deal.

In a joint statement released on January 25, 2015, US President Barack Obama and the Indian Prime Minister Narendra Modi announced that they "welcomed the understandings reached on the issues of civil nuclear liability and administrative arrangements for civil nuclear cooperation, and looked forward to U.S.-built nuclear reactors contributing to India’s energy security at the earliest."

What understanding were they talking about, and why is the agreement being described as a landmark event? Here is a compilation of the relevant facts broken down in a way that it is easy for everyone to understand.

Historical Background

Following India's 1974 nuclear test and continued refusal to sign the Nuclear Non Proliferation treaty, the US and its allies isolated India from global trade of nuclear reactors and fuel through regimes such as the Nuclear Suppliers Group (NSG), forcing India to rely on home grown nuclear reactor technology and indigenous supply of uranium fuel.

India's economic liberalization in the early nineties led to higher growth rates than the 3 to 4 percent 'Hindu' rate infamously associated with the country. Power requirement surged and the coal rich country set up new thermal power plants to meet the demand. A consequent increase in India's carbon footprint put a question mark on the wisdom of the US led nuclear apartheid aimed at the country.

Meanwhile, the rapid emergence of China as a regional power determined to challenge US hegemony in the Asia Pacific region started to rattle the US.

With the end of the cold war, India prodded a US rethink on Indian isolation from the world order in civil nuclear energy. The US not only responded positively to Indian prodding but pleasantly surprised India by accepting it as a regional and emerging global power and suggesting a strategic Indo-US alliance!

On July 18, 2005 in a joint statement then Indian Prime Minister Dr. Manmohan Singh and then U.S. President George W. Bush announced that the US in principle would end India's nuclear isolation and support civil nuclear cooperation with the country. As a quid-pro-quo, India conceded to a safeguards regime that would not only cover nuclear fuel and reactors supplied to India in the future, but also some existing indigenously developed operational civil nuclear reactors that were not under safeguards.

On August 1, 2008, the International Atomic Energy Authority (IAEA) approved the safeguards agreement with India

To move from an in principle to a formal agreement, the US needed to amend its domestic law and obtain a waiver for India from the Nuclear Suppliers Group (NSG).

The US approached the NSG to wave off restrictions on Indian civilian nuclear trade. The waiver on September 6, 2008, made India the only non signatory of the Non-Proliferation Treaty (NPT) to be allowed normal nuclear commerce while maintaining an active nuclear weapons program.

The U.S. House of Representatives approved the agreement on September 28, 2008 and the US Senate on October 1, 2008.

On October 10, 2008, India and the US signed the 123 Agreement known as the US - India Civil Nuclear Agreement or Indo-US nuclear deal.

(Section 123 of the United States Atomic Energy Act of 1954 makes an agreement for cooperation a prerequisite for nuclear deals between the US and any other nation.)

On February 2, 2009, India signed an India-specific safeguards agreement with the IAEA under which India agreed to place under safeguards 14 out of its 22 commercial nuclear power reactors and all future nuclear powers reactors that it constructs.

Importance of Indo-US Nuclear Deal

Through the deal, the US hopes to strengthen its strategic ties with India, profit from selling civil nuclear reactors to India, and help India reduce its carbon footprint.

The deal will help India to meet its growing energy needs. It is true that India has a lot of coal and coal fired power plants can produce electricity at lower costs than nuclear power plants. However, a coal fired thermal plant located more than 1,000 km from a pithead can drive up operating costs to an extent where unit power generation price matches the unit price of a nuclear reactor. The problem with gas fired power plants is that they increase our dependence on imported energy. Thermal power plants also have a high Greenhouse Gas (GHG) footprint.

Renewable energy sources such as Hydro, Solar and Wind have a large but limited potential and high capital costs.

Nuclear power plants are also characterized by high capital costs which makes the electricity generated by them expensive. But the cost of generation reduces over the years as initial investments are recovered. The big advantage is that nuclear power is limitless. Also, it generation leads to virtually no GHG emissions.

Under the circumstances, Nuclear power plants would have to be an important part of the mix for India to become energy independent,

India currently operates 20 nuclear power reactors with an installed generating capacity of 4,780 MWe.  Currently, most of the nuclear power is generated using indigenously developed 220 MWe Pressurized Heavy Water Reactors (PHWRs). India has successfully scaled up its reactor technology and is now in the process of installing 700 MWe PHWRs. The installed nuclear power capacity will reach 10,080 MWe by the year 2017 on progressive completion of projects under construction.

The Department of Atomic Energy (DAE) has set a target to install about 20 GWe nuclear power by the year 2020. The target includes 2.5 GWe of Oxide fuelled Fast Breeder Reactors (FBRs) and 8 GWe of Light Water Reactors (LWRs), which would need to be imported.

A DAE study indicates that it is possible to generate about a quarter of the total electricity requirement of India using nuclear power by the middle of the century.

In order to realize DAE targets, India need a large number of 1,000 MWe or more Light Water Reactors such as the two Russian reactors at Kudankulam.  Setting up such power plants requires a lot of capital and therein comes the need to allow foreign participation.

Nuclear Liability Legislation

In the case of a nuclear accident, liability is governed by the Paris Convention on Third Party Liability 1960, The Vienna Convention on Civil Liability for Nuclear Damage 1963, and national legislation on compensation for nuclear damage consistent with the principles of these Conventions.

The Paris convention channels liability exclusively to the nuclear plant operator, regardless of fault, but subject to exceptions. The convention limits the amount of compensation and period for making claims. Finally, it grants exclusive jurisdiction to the courts of one country, normally the country in whose territory the incident occurs.

The Vienna convention was amended by The Convention on Supplementary Compensation (CSC) for Nuclear Damage 1997 which stipulates that the installation state shall ensure availability of SDR 300 million or a greater amount to pay compensation following a nuclear plant accident.

As part of the Indo-US Nuclear Treaty, India was required to enact a nuclear liability legislation consistent with the above conventions.

Civil Liability for Nuclear Damage Act, 2010

The Civil Liability for Nuclear Damage Act (CLiNDA) enacted by the Indian Parliament in 2010 focuses on providing prompt succor to victims of a nuclear accident through monetary compensation, irrespective of the reason for the accident and without waiting for courts to fix blame. Such liability is referred to as No Fault Liability.

As per the provisions of the CSC 1997, CLiNDA sets the maximum amount of liability with respect of each nuclear incident at SDR 300 million or such higher amount as the Central Government may specify by notification.

Under Clause 6.2 of the Act, the plant operator is obliged to pay Rs 1,500 crore of the liability. (Unless the accident results from a natural calamity or act of war, in which case the government shoulders the liability.)

Under Clause 7.1 of the Act, the central government will bear any liability in excess of Rs 1,500 crore.

The problem with CLiNDA is that it was shaped as much by the Paris and Vienna nuclear liability conventions as by the imperative to deter another accident like the Bhopal gas tragedy of 1984. (An accident in a plant operated by Union Carbide Corporation, an Indian company majorly owned by the US Company Union Carbide, resulted in the leak of toxic gas which affected 500,000 people and killed 20,000.) The parent US company, which supplied the plant, wasn't held liable for the accident.

As per Clause 17b of CLiNDA, if a nuclear accident is attributed to a supplier employee or defective equipment the operator can seek compensation from the supplier. This provision of CLiNDA doesn't conform to the Paris and Vienna conventions which place liability exclusively on the operator.

Also, Section 46 of the Act states that provisions of CLiNDA are not "in derogation of any other law in force," which would allow individuals to sue operators for compensation under any existing law or past legal precedent (tort, or civil claims under common law), seeking compensation in addition to the SDR 300 million or more disbursed under Clause 6.

Treaty Stall

Despite the Indo-US Nuclear Agreement 2008, US companies have yet to sell a nuclear reactor to India. Potential suppliers like General Electric Hitachi Nuclear Energy International (GEH) & Westinghouse Electric Company (WEC) consider CLiNDA 2010 provisions unacceptable.

GEH and WEC argue that it's not logical for a supplier to be held liable for equipment failure after a contractually agreed timeframe that gives an operator adequate time to assess any equipment shortcomings or defects.

The suppliers say that because some CLiNDA clauses are not compliant with international norms, and in view of increased concerns over the safety of nuclear power plants after the Fukushima Daiichi, Japan disaster on March 11^th 2011, insurance companies are not ready to cover their operations in India.

Flag Rights

Another stumbling block in operationalizing the deal has been the US demand for inspection rights (Flag Rights) in perpetuity at US nuclear reactors for tracking nuclear fuel used in the reactors.

India consider the demand a violation of its sovereignty and refuses to concede to. It also contends that the Indo-US Nuclear Agreement 2008 only permitted IAEA inspection.

V.K. Thakur

References

Obama Clears a Hurdle to Better Ties With India - NYTimes.com

PRS | Bill Track | The Civil Liability for Nuclear Damage Bill 2010

Broadsword: How Modi & Obama’s back-room boys broke impasse on n-deal in London

CLiNDA - 2010

9 Takeaways on US-India Ties After Obama’s India Visit | The Diplomat

Explained: Nuclear deal moves, but some way still to go | The Indian Express | Page 99

Convention on supplementary compensation for nuclear damage | International Atomic Energy Agency

Meeting Demand Projection | Department of Atomic Energy