We should not proceed under the assumption that we will be perpetual operators and importers
The passage of the legislation on civil nuclear liability was, in several respects, a positive development. Despite the controversy on Article 17(b) of the Act, relating to liability of suppliers, there was broad political support to the legislation. This was welcome, and bodes well for the future.
The debate on the nuclear liability Act, both in our Parliament and in our media, however, was not a dispassionate one. One of the significant factors was the perceived US double standards, in the wake of the court judgement on the Bhopal gas leak tragedy, which coincided with the multi-billion dollar liability slapped on BP by the US for the large oil leak in the Gulf of Mexico.
I will not go into the legal details of this legislation. I will focus on some aspects of its international dimensions and, more importantly, on possible implications in terms of our national interests. My observations are based on my involvement since the 1970s in our civilian and subsequent strategic nuclear programmes, and my ambassadorial assignments in major world Capitals.
Our outrage at US abrogation of the Tarapur agreement was based on our belief that the bilateral agreement could not be unilaterally terminated by legislation in the US Congress. The Tarapur experience, and the uncertainties we sensed about future developments in the Soviet Union, led to the insertion of a clause in the 1988 Indo-Soviet agreement on non-retroactive application of subsequent laws for setting up two Russian 1000 Mw VVER reactors at Kudankulam in Tamil Nadu. Thus, Russia could continue to implement this agreement, despite its subsequent joining of the Nuclear Suppliers’ Group (NSG), and adjusting its laws to conform to NSG guidelines. Russia could claim reciprocal treatment for the two reactors for which contracts are signed and under implementation. Our system, however, does not permit differential treatment in terms of applicable laws. We had also conveyed clear commitments to the US in our Letter of Intent of September 2008. This includes the commitment to adhere to the Vienna Convention on Supplementary Compensation for Nuclear Damage (CSC).
One notable characteristic, which has set India apart from many countries, including the US, France and others, is our unbroken record of fully honouring all our international commitments, despite facing virtually all conceivable challenges and crises since our Independence. This characteristic is rooted in our civilisational heritage. It was the US, more than any other country, which took the lead in freeing India from its global isolation in civil nuclear commerce. It would thus be shameful if, for one reason or the other, our inability to honour our commitments resulted in the US being shut out of the Indian market, while others who piggy-backed on the US-led initiative derived all the benefits.
It is natural for the US to expect to benefit from a large potential nuclear power production market in India. However, assertions that US corporate interests motivated the Bush administration to conclude the historic Indo-US deal are false. If US business interests were indeed of paramount interest, the US would have reversed the sequence and sought completion of all aspects of the Indo-US deal before seeking the NSG exemption permitting nuclear commerce with all other interested countries. The vast majority of US corporate leaders who lobbied for the deal in the US Congress had no stake in the nuclear industry. Both the major US nuclear industry companies had significant Japanese stake-holding.
An important factor, which I had repeated ad nauseum for over a decade in the context of defence supplies, also applies to the global nuclear industry. The global supply chain is becoming more integrated and inter-dependent, with acquisitions, joint ventures and tie-ups with cross shareholding. This global trend is gathering momentum. Westinghouse is owned by Toshiba. Hitachi and General Electric have major mutual shareholding and global collaboration, while GE also has cooperation with Mitsubishi and others. Areva’s traditionally close collaboration with Siemens did not prevent the latter from its recent collaboration with Russia’s Rosatom. Areva has a joint venture with Northrop Grumman for manufacturing reactor components. All Russian exported power reactors have the Siemens-Areva digital instrumentation and control systems. These are just a few illustrative instances. Our failure to fully comprehend the collaboration in the midst of competition had cost us dearly in defence procurements. We need not repeat such mistakes in civil nuclear cooperation.
India was the first Asian country to build a nuclear reactor. It is among a handful of countries in the world with full nuclear fuel cycle capabilities. Hence we should not proceed under a self-demeaning assumption that we will be perpetual operators and importers and not emerge as exporters and suppliers. We will have to endeavour to get global suppliers to provide for local content of around 70 per cent of total costs, both for reducing costs of power generation and for meeting our vital economic interests. This should involve not just specialised construction but also manufacture of reactor and other components. This will necessitate a domestic regime which would encourage foreign suppliers to have licensed production at major Indian companies and sourcing of supplies from a wide base of Indian SMEs. Modernisation of our nuclear industrial base should also involve transfer of technology and joint research, and development of new technologies. One of the most effective ways of promoting technology transfer and collaboration is through joint ventures, ideally with 50:50 equity participation. These would, of course, involve both private sector participation and encouraging FDI.
I am convinced that rapid growth in nuclear energy generation in India will be facilitated by opening up this sector to both Indian and foreign private sector participation. There would be no insurmountable security implications since these plants would be under IAEA safeguards. By encouraging our private sector to participate in collaboration as well as in parallel with the Nuclear Power Corporation of India, we should be able to allocate more of our scarce public resources to education, health and basic infrastructure in our rural areas.
It remains to be seen how our nuclear liability law and subsequent measures will contribute towards meeting the longer term interests of our country, including those I have referred to.
The author is former Indian ambassador to the United States, Russia and Germany
