The US and India have been gunning for each other through the summer while taking aim at outsourcing, work visas, and the absconding Warren Anderson.
And now, India’s new nuclear liability law threatens US energy deals. Despite the perennial irritants, the Wall Street Journal (WSJ) reported on Wednesday that the two crotchety friends are discussing ways for American nuclear suppliers to get around the liability law.
It said that if the two sides can’t find a workaround, American companies such as General Electric and Westinghouse would pass on the Indian market as the liability risks are too high.
The Russian and French state-controlled nuclear equipment companies have a distinct advantage over US suppliers as their governments provide a certain amount of liability protection.
The WSJ quoted an unnamed US official as saying that one option the US and India are considering is a government-to-government agreement that would take precedence over the law, whereby India would pledge to indemnify or in some way compensate foreign suppliers should they be sued.
“Another option under consideration,” the official told the paper, is for India to negate the effect of the law when it formally implements it.
“That would be akin to a presidential signing statement, in which the chief executive declares his interpretation of recently passed legislation — at times challenging the measure.”
A third route would involve India’s only nuclear operator, a state-run firm, signing contracts promising to take on all liability with US suppliers.
The state department has steadfastly refused to define the contours of the talks.
“We continue our discussions with the Indian government on this issue and we note that Indian business leaders are concerned about some specific aspects of the law that was just passed by Parliament,” said state department spokesman PJ Crowley. “We will look to the Indian government to see what changes can be made.”
The new Indian law exposes foreign firms supplying equipment to nuclear plants to liability in the case of accidents. China, France, Canada, Germany, Japan, Russia, Britain and even the US have similar laws that channel liability exclusively to nuclear-plant operators and do not provide a right to recourse against suppliers. India and South Korea are the only countries that hold suppliers accountable to lawsuits, although in South Korea, the right to recourse can be excluded through a carefully crafted contract.
Prime Minister Manmohan Singh, who championed the India-US nuclear deal and threw open India’s $150 billion nuclear power market to global equipment suppliers, hasn’t hinted at watering down India’s nuclear-liability law.
Instead, he told a meeting in New Delhi with local editors on Monday that he was confident foreign suppliers would find India’s nuclear-shopping blitz rather too tempting. “I hope their profits will tell the true story,” Singh reportedly quipped. “If they make a lot of money, they will forget some of the concerns they have expressed.”
Analysts say India can’t simply wish away the US grumbling because there’s more than just the multi-billion-dollar nuclear reactor business up for grabs. The deal is seen as a proxy for Indo-American relations, and augurs well for future geostrategic, defence and economic ties.
Ron Somers, president of the US-India Business Council (USIBC), who engaged Patton Boggs with a billing rate of $495 an hour to lobby lawmakers in Washington, said the India-US nuclear deal signifies the “Berlin Wall coming down”.
At an estimated $2.5 billion per 1,000 MW of electricity — the capacity that most new plants will provide — the nearly 30 new reactors India will commission over the next three decades could be windfall business for Russian, French and US nuclear equipment suppliers.
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“We are aware of the concerns of industry regarding the final version of the legislation passed by the Indian Parliament. The US government is engaged with the government of India to ensure that the full potential of this historic agreement can be realised.”
Timothy J Roemer, US ambassador to India
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