The last few days have seen the revival of the dormant India-US nuclear
deal, signed in 2008. It took six long years for the two countries to
declare that issues relating to the deal have been resolved which was
claimed as a breakthrough. While one could feel good at finding a
solution "culminating towards commercial operation consistent with our
laws and international legal obligations", as stated by Prime Minister
Narendra Modi, without further details, no clear conclusions can be
drawn.
The statements by Prime Minister Modi and US President
Barack Obama made during their press conference support this assessment.
So the question now is: How soon will the 'breakthrough' lead to
accelerated addition of nuclear capacity, thereby addressing the issues
of climate change and energy security.
Assuming the answer is
sooner than later, there are several other questions which arise and
which need to be addressed. Due to the lack of details, there is
considerable speculation as to how an issue relating to the liability of
suppliers, which dragged on for nearly four years, got resolved in such
a 'breakthrough' manner. The fastest, but hardest, route to resolve the
issue is to amend the relevant clause (s) of the Civil Liability Act of
2010. This being highly political in nature, keeping in mind the Bhopal
tragedy and its aftermath and the commitment by the government not to
dilute the Act, the possibility of amending it can be ruled out.
It
is understood that an Indian insurance pool led by the General
Insurance Corporation (GIC) will be formed to enable the operators and
suppliers procure insurance to cover their liability. This idea has been
in the air for quite some time now and the progress made is not known.
An Indian media report indicated that "a conglomeration of India's
largest public sector companies, including the state-owned General
Insurance Corporation (GIC), can only provide coverage up to Rs. 900
crore ($146 million) of the required Rs.1,500 crore". Others suggest
that only Rs.750 crore will be provided by the public sector companies
and the government will supply the remainder to the insurance pool via
instruments known as catastrophe bonds.
On the other hand, it has
been reported in the US that "Indian and US officials said part of the
solution to the liability impasse could be a $122 billion insurance
scheme proposed by India. That would be funded by India's government and
Indian nuclear companies and be managed by the General Insurance
Corporation of India, according to Indian nuclear negotiator Amandeep
Gill".
Obviously, there is no clarity on this issue and the
Indian government has also not spelt out any details. If the insurance
pool is totally Indian, it can be observed that the entire liability, in
case of an accident, will have to be picked up by the Indian insurance
companies and the Indian government. A serious accident like Fukushima
could result in a heavy financial burden on GIC. Hopefully this has been
analysed to keep risks well below the break point of the insurance
companies.
One possible option for the government is to explore
the possibility of the Indian insurance pool becoming part of the global
nuclear insurance pool for which some conditions, like allowing reactor
inspections, will have to be agreed to. It is interesting to note that
organisations like the International Atomic Energy Agency (IAEA) and the
World Association of Nuclear Operators (WANO) already inspect reactors
from the safety point of view.
One other issue relates to Clause
46 of the Civil Liability Act of 2010 relating to application of other
laws. US laws allow victims to directly claim damages from operators,
suppliers and designers - though international liability conventions
place the liability exclusively on operators. Clause 46 is similar to
the US law. Hence, it should not come in the way of moving towards the
commercial operation of the deal.
Assuming that all issues
related to civil liability are resolved, the crucial issue of cost of
energy will also have to be addressed. It is understood that a French
offer is stuck because of high capital costs and high unit energy cost.
Lastly,
from the Indian standpoint, the aspect of public acceptance/opinion
will have to be seriously addressed. Otherwise, all the efforts put in
to add new capacity will not only go waste but also negatively impact
climate change.
(Rajgopal S. and Debapriya Das are with The
Center for Study of Science, Technology and Policy (CSTEP), Bengaluru.
The views expressed are those of CSTEP. They can be contacted at
[email protected] and [email protected])
