The Obama administration as well as industry remain tight-lipped
The US seems to have been shell-shocked into silence by the nuclear liability Bill that cleared the Lok Sabha yesterday. While the administration and industry both remained tightlipped, a glimpse into their reaction was provided by Ashley Tellis, who was one of the key persons working on the India-US civilian nuclear agreement during the Bush administration. Says Tellis, now a senior associate with the Carnegie Endowment for International Peace think-tank in Washington: “The degree of consternation in US government circles is beyond anything I’ve seen in recent years.”
The widespread concern is over the extension of liability to suppliers, an idea vigorously opposed by Indian industry as well. According to James A Glasgow, Energy Attorney with the Pillsbury law firm in Washington, DC, “Channeling liability solely to operators is the bedrock principle of any nuclear liability regime. If some country’s law is against this principle, it would cause a collision between the two.”
Adds Tellis, “Assuming this becomes law, it puts severe burdens on private suppliers, both Indian and foreign, entering India’s nuclear power industry.” He also believes this would negatively impact Indo-US relations: “The US spent political capital at home and abroad to win exceptions for India, partly with the expectation that it would create an investment environment for US companies in India.”
GE Energy and Westinghouse, two potential US suppliers of reactors to India, declined to comment on the proposed legislation. A spokesman for Westinghouse said the company would reserve comment until the Rajya Sabha passed the Bill as well.
The US India Business Council, which had actively lobbied American lawmakers in favour of the nuclear agreement, also did not respond to requests for an interview.
An International Trade attorney at the Pillsbury law firm, Sanjay Mullick, acknowledged that there was understandable concern about a potential accident and, therefore, the temptation to have a comprehensive liability regime that fixed some liability on suppliers as well. But he argued that it had been proven through extensive international practice that channeling liability solely to operators was the most effective and speedy mechanism of delivering compensation to victims.
The lawyers, Glasgow and Mullick, also maintained that such channeling would eliminate the need for a large number of supplier parties to buy expensive liability insurance, which was not available to them in the first place. Under this law, “suppliers will shy away” from the Indian market, predicts Tellis.
Lightbridge is a McLean, Virginia-based company that provides nuclear fuel technology and consulting services in the nuclear sector. Its president and CEO Seth Grae says his company will not be directly impacted by the liability provision for suppliers in the Bill passed by the Lok Sabha, but adds, “I don’t think this law will accomplish what most US and Indian companies are looking for.”
Grae, who has traveled to India 10 times to meet with companies and government entities, adds, “From the US companies’ point of view, the Indian legislation differs from international norms, where liability flows to operators of nuclear plants.”
He points out that several US suppliers have stayed away from China because they are uncomfortable with the liability regime in that country, and cautions that the Indian law could also affect Indian exporters to nuclear sectors in other countries that may be unhappy with the Indian liability regime.
But Grae is optimistic, calling the legislation “a step in the right direction”. He says: “The legislative process in the US and India allows revisions.”
The passage of nuclear liability legislation in India was the last remaining deliverable before commercial activity between India and the US could begin under the nuclear agreement. But even as the political debate was going on in India earlier this month, industry sources in the US had maintained that India had given an undertaking to deliver legislation that would be compatible with the Convention on Supplementary Compensation, or CSC, with the key factor being liability limited to operators.
A US government official had stated to Business Standard on August 5: “As Prime Minister Singh said in his May 25 press conference, India needs an international standard nuclear liability bill ‘if it is to become a major nuclear energy power’. We welcomed the PM’s confidence that the bill ‘will have the support of all political parties interested in India’s growth,’ and hope a bill that meets international standards will be passed soon so that India can begin to import reactors from the US and other international suppliers.”
The legislation that was passed by the Lok Sabha is “fundamentally at odds with the CSC,” says Tellis. Arguing that this legislation would “frustrate the Prime Minister’s vision of expanding nuclear power generation in India”, Tellis says, “The government of India ended up in a Faustian bargain with the BJP, which succeeded in gutting the nuclear deal indirectly.”
If the successful completion of the nuclear agreement was to be one of the showpieces of US President Barack Obama’s visit to India in November, it may be time to revise the agenda. For now, observers in the US are waiting to see what happens in the Rajya Sabha.
