September 21, 2013

'Sweetheart' nuclear deal for US companies sparks furore



Indrani Bagchi, TNN | Sep 20, 2013, 12.55 AM IST


http://timesofindia.indiatimes.com/india/Sweetheart-nuclear-deal-for-US-companies-sparks-furore/articleshow/22774774.cms

READ MORE Indo-US nuclear deal|India's nuclear liability law|Manmohan Singh|Department of Atomic Energy|Goolam E Vahanvati
'Sweetheart' nuclear deal for US companies sparks furore

The US has been very critical of India's nuclear liability law, and this is generally believed to be one of the major hurdles to the relationship.


NEW DELHI: The government's effort to find an honourable way around the constraint of the nuclear liability law without actually violating it ran into rough weather on Thursday with the opposition accusing it of seeking to dilute the law for the sake of US and other foreign suppliers.

The opposition seized upon attorney general Goolam E Vahanvati's opinion, as reported in TOI, that the country's nuclear operator NPCIL could waive the right to recourse to suppliers' liability in a commercial contract for a foreign-supplied nuclear plant, to allege that the government was seeking to dilute the provision in the nuclear liability law that would hold foreign reactor suppliers liable in cases of mishaps caused by faulty and defective equipment.

The government's decision that an early works agreement between NPCIL and Westinghouse could be cleared by the Cabinet Committee on Security without having to seek the nod of the Atomic Energy Commission was cited by the BJP and Left as evidence of government's desire to undo the liability law for the sake of American companies ahead of PM Manmohan Singh's US visit at the end of next week.

With BJP and Left alleging that the government would use the AG's opinion to waive the liability of foreign suppliers, the Department of Atomic Energy (DAE) clarified in a statement that there was no question of subverting Indian law.

"Foreign suppliers as well as domestic vendors have raised a number of queries with regard to the manner in which the Civil Liability for Nuclear Damage Act, 2010 and its associated rules will apply to their contracts. Since these queries involve questions of law, Department of Atomic Energy sought the opinion of the ministry of law and justice on these issues. This will be examined by the Department of Atomic Energy and NPCIL," DAE said.

Foreign minister Salman Khurshid on Thursday said the law and Parliament's approval remained supreme. "The protracted negotiations that have taken place between India, the US and commercial companies in the US have been for this reason that we have stood on our ground. We have said that whatever position Parliament has taken, there no question of retreating from it. We have been convinced, and have tried to convince the US negotiators that whatever basis we have of our agreement, there is adequate scope in that for them to get the protection that they legitimately deserve."

When questioned in 2012, the MEA too had held the view that the operator had the right to choose not to exercise the right to recourse, and thereby limit the liability for the supplier.

The US has been very critical of India's liability law, and this is generally believed to be one of the major hurdles to the relationship. The PM, who made the nuclear deal the centrepiece of UPA-1, has been wanting to fix the problems with the law, but the allegations of sellout underlined once again that he has only limited maneuver space.

The CCS is scheduled to meet on Tuesday to decide on the early works agreement with Westinghouse. This agreement, as reported by TOI, opens the way for detailed and confidential discussions between the two sides.

At the heart of the government's actions is this — the government's signature achievement, a nuclear deal, to enable India to access clean nuclear power by allowing foreign-origin reactors has come unstuck because of the provision in the law holding foreign suppliers liable.

"The government can do one of two things — keep the law's provisions and make nuclear power horribly expensive. Or lower the cost of entry for foreign players, while building strong safety mechanisms. We have chosen the latter," said an official close to the development.

The nuclear liability law, with its supplier liability clause, cooled the ardour of many countries who wanted to invest in India's nuclear energy sector. The US, France and Russia have all objected to Clause 17(B) and Clause 46 which together not only make it difficult for them to invest, but also exponentially raises the cost of nuclear power, which was not factored in by government managers when they were drafting the law.

India signed the Convention for Supplementary Compensation (CSC) in November 2010 but hasn't been able to ratify it yet, because its domestic law violates international regulations, which places the liability for compensation solely on the operator, in this case, NPCIL. There is no provision for supplier liability in the CSC. But the liability law has taken a strongly emotional hue, which, along with its declining political capital, has made it difficult for the government to return to Parliament to amend the law. Internationally, the government has been under fire for making it difficult for foreign companies.

The government codified rules and regulations to the law in November 2011, which stated that the liability would be limited to the period of the initial contract, that is, five years. The CPM's Sitaram Yechury raised an amendment to the regulations, but since it was not followed through, the amendment lapsed.

In 2012, the liability law ran into trouble with Russia. Russia refused to let the agreements for Kudankulam 3 and 4 be governed by the liability law. That would raise the price of the power produced to the extent that it would be priced out of the market. At the time too, Vahanavati had said, "Section 17(a) provides for recourse if such right is expressly provided for in a contract in writing. If the operator chooses not to incorporate such a provision in the contract, it would be open for him to do so."

Both Russia and France, who have started negotiations on nuclear plants with India, have indicated this would have to be legally watertight in any commercial contract.

1 comment:

Anonymous said...

It may be noted that the larger "nuclear park" agreement with Westinghouse or its smaller pre-runner namely the "early works agreement" mentioned in this blog post, are being concluded without going through the normal tendering process -- global or indigenous. Let's say, just for now, we overlook this "no-bids" issue, and consider only the early works agreement costing about Rs 100 crores. To my thinking, NPCIL would be well advised to insist and include even in this "small" contract, all the clauses of the Civil Nuclear Liability Act as envisaged by the Parliament. It is not outside the realm of possibilities, that an error caused through an act of commission or omission at this stage by the Contractor, in determining one or more parameters (may be site-specific) to be used by him in his final design, comes to the fore only at a later date when a nuclear accident has actually taken place, requiring massive quantum of liability payments.

It would be best if this "small" contract or its "after-runner", the "nuclear park" one, with a foreign Supplier, is avoided altogether. It is not in our country's interest to import nuclear power plants that too at exorbitant costs, just to be able to purchase a few tonnes of fuel. Earlier it had been indicated on several occasions, in the answers given in the Parliament, that India has enough mineral resources of Uranium to fuel its charted programmes. Since then, methods for economical extraction of Uranium from the very large deposits in Andhra Pradesh / Orissa have been developed indigenously and are being implemented. Also import of nuclear power plants has been described as merely being an "additionality". I think, we would be well advised to shun importing nuclear reactors.