India is the fifth-largest producer of energy in the world at 167000 megawatts. But its large population means that per capita consumption is exceedingly low just 50 watts compared with 226 watts in Brazil and 1460 watts in the U.S. In addition power outages and brownouts are a daily drag on India’s economy. Virtually every successful business must depend on auxiliary electrical power in the form of battery backup diesel generators and more. To fill this gap and to facilitate its goal of bringing hundreds of millions of its people out of poverty India is seeking to deploy every form of electrical generation that it can access including nuclear power.
India plans to expand its nuclear energy capacity from the current 5000 megawatts to 63000 megawatts by 2032 a target that will require upwards of 100 billion in investment. The 2008 Civil Nuclear Agreement between the U.S. and India opened the door for Western companies to compete for this substantial business. Reactor makers equipment builders engineering and construction companies materials and parts suppliers and a myriad of experts from overseas stand to gain from this bonanza.
In the wake of the Fukushima disaster in March India has joined other nations and the global nuclear power industry in studying the situation carefully. While Germany Switzerland and Italy have put the brakes on atomic energy and plans for a “nuclear renaissance” in the U.S. may slow somewhat India has made a decision to proceed. Without a huge expansion of nuclear energy production it is clear to India’s business and political leaders that the economic miracle of 9 percent growth cannot be sustained. Nuclear “is an absolute must” Commerce Minister Anand Sharma told an eager audience of U.S.-India Business Council executives in June in Washington.
Supplier Choices
The real question for India is whether it will be able to select from among the widest choice of global industry suppliers in building its nuclear facilities. Rather than standardize on just one platform the Indian approach has been to invite many nuclear participants from overseas to supplement its indigenous development of heavy water and fast breeder platforms. Government leaders and corporate aspirants from the U.S. Canada France Russia Kazakhstan Korea Britain and other countries have made the pilgrimage to New Delhi and Mumbai home to the Atomic Energy Dept. and the government-owned utility NPCIL.
Even as nuclear safety issues are at the forefront of public consciousness U.S. export controls and Indian liability laws remain significant considerations—and potential obstacles—affecting India’s nuclear power ambitions. Several questions remain that foreign suppliers need answered before the last constraints can be eliminated.
When President Obama visited India last November he said the U.S. would remove several Indian organizations from a Commerce Dept. blacklist known as the “Entity List.” In addition to supporting India’s membership in the Nuclear Suppliers Group these export reforms sent a clear signal that concerns about U.S. sanctions and reliability of supply were a relic of the past. The U.S. has a somewhat deserved reputation as having restrictive and convoluted export controls. Despite some progress the U.S. still has work to do in making its export licensing process more transparent and efficient so India will know it can count on American technology and U.S. companies can meaningfully compete for India business.
Liability Concerns
All suppliers and vendors need to know a nation’s liability laws in advance of exports to that country. India passed a liability law in 2010 that has caused concern among global suppliers. Subsequent mixed signals by Indian authorities on this issue have further muddied the waters. Without clarity on how India’s laws will apply on nuclear liability it is not possible to count on a surge in sales and investment toward India.
Even Indian manufacturers such as Bharat Heavy Electrical have expressed reservations about the liability situation in the event of a nuclear accident. NPCIL India’s sole nuclear utility is also concerned that if a mishap were to occur it would be difficult to determine the responsibility of vendors. It is in part due to such concerns that virtually all nations deploying civilian nuclear power have adopted the Convention on Supplementary Compensation or enacted laws that “channel” liability exclusively to the operator rather than spreading it among suppliers and vendors. Channeling liability to operators is also believed to promote the construction and operation of the safest plants possible. Further it provides a swift and more certain compensation mechanism were an accident to occur.
This is why clarifying India’s posture toward the Convention on Supplementary Compensation or CSC is important. Since India has signed the CSC and plans to ratify it prior to the end of 2011 its executive branch needs to ensure that its nuclear liability law is consistent with the CSC’s fundamental “channeling” requirement. The liability law adopted by India last year does not appear to follow the channeling principle and instead is widely understood to provide for supplier liability. Squaring India’s national nuclear liability law with its commitment to the CSC’s channeling principle is the key remaining action item for international nuclear commerce with India to begin in earnest.
Last updated: July 9th, 2024
