Modi-Obama Nuclear Breakthrough- A Vicious Circle

By, Roshni Rajiv*

President_Barack_Obama_toasts_Prime_Minister_Narendra_Modi_during_a_State_Dinner_in_New_Delhi

The preceding post, India’s Nuclear Dilemma analysed the major impediment in implementing the Indo-US nuclear deal. It elucidated India’s weak bargaining power to persuade nuclear suppliers to accept the supplier liability clause. As foreseen, the nuclear supplier liability clause did not find a place in the Indo-US nuclear breakthrough agreement concluded during President Obama’s recent visit.

On the second day of President Obama’s visit, both the Heads declared that they have successfully found a way forward in implementing the nuclear deal without diluting the nuclear liability law. However, what it means is that US government has not accepted the addition of supplier liability clause in nuclear contracts but has found a middle path to work around the existing law of India, without amending it. The finer details of the settlement remains a mystery as Modi government has not revealed any details to the public. This approach has made many critics argue that the nuclear breakthrough is rather a symbolism than a reality.

The take away is that India and US are going forth with the implementation of the deal. The question arises how India will have the cake and eat it too!

As discussed in the previous post, US was clear on its stand that it won’t accept the supplier liability clause. The same position is taken by other nuclear suppliers such as Russia or France. BJP government was in the dilemma of not being able to traverse back in its path and amend the nuclear liability law to suit the foreign demand. In such a scenario, the breakthrough announced in the Indo–US nuclear deal was introducing an insurance pool to secure all the American nuclear reactors or components.

Last year, Russian Deputy Prime Minister Dmitry Rozogin visited India to finalise an agreement to supply nuclear reactors for Kudankulam plant in Tamil Nadu[1]. Supplier liability clause came as a logjam there too.  An agreement was reached when a way forward was found without infringing the nuclear liability law, similar to the Indo-US nuclear breakthrough.  Russia required General Insurance Corporation of India, a government company to provide an insurance cover to all Russian reactors to cover any compensation Russia has to pay in case of a nuclear accident. The insurance premium is to be paid by Indian government for the lifetime of the reactors. The insurance cost gets added to the total cost of the reactors which increases the financial burden on the state exchequer and ultimately the burden is passed onto the Indian tax payers.

The objective of the nuclear liability law is to hold the foreign supplier responsible to compensate Indians in case there is a defect in its supplies or services. Government’s way forward is to still keep the supplier responsible for its actions but to pay compensation to Indians on the supplier’s behalf out of Indian tax payers’ pockets. By this way forward, how are we actually achieving the objective of the nuclear liability law? This proposition may not be directly infringing the nuclear liability law but is indirectly making the objective of the law redundant. Instead, Indian Government could have just started an insurance pool for the people living in the vicinity of the nuclear reactors as suggested in the previous post.

The Modi-Obama nuclear breakthrough is also hailed as a major success citing the insurance pool arrangement but it is only a vicious circle creating more issues.

Firstly, the Russian example has led US also to negotiate for a similar insurance deal. Soon, other nuclear suppliers such as France and Japan will follow suit to strike a similar deal with India. Soon, Indian nuclear law would be reduced to a mockery. Secondly, the intention of supplier liability clause was to ensure the suppliers are more precautious and enhance the safety and security of the nuclear reactors while supplying to India. By paying for their insurance cover, the suppliers won’t be nudged to take those extra preventative actions. Further, nuclear liability law intended to achieve welfare and safety for the people at foreign supplier’s cost. However, with the new insurance proposition, people’s safety parameter is not any more secured than before yet they are additionally burdened to pay for the supplier’s insurance cover.

The Government has not disclosed the finer details of the nuclear settlement which raises a thought that Modi government may be aware about the implications of its actions and fears an opposition by political parties and public. The sad reality remains that foreign suppliers have the cake and they are eating it too and India looking at a mirror image assumes or pretends that it has the cake and is eating it too!

 

[1] http://www.telegraphindia.com/1140402/jsp/nation/story_18145683.jsp#.VNHAeS7srIU

 

*The author is a research intern at CPPR

 

Disclaimer: The views expressed here by the author need not necessarily represent the views of CPPR
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