Lack of progress on nuclear deal to haunt Narendra Modi during US tour

Even as the Prime Minister Narendra Modi on Thursday embarked on a five-day trip to the United States, to build a new chapter in the strategic partnership, the "black spot" in the relations the lack of progress in nuclear deal will haunt him during his interactions. The issue is on top of minds of American business magnates, who soon after the deal in 2005 were salivating to net contracts worth $140 billion to supply equipment and reactors. Indian officials, who were engaged in finalising the agenda for the bilateral meetings are understood to have conveyed their American interlocutors that the Prime Minister would not like them to raise the issue, as the new Indian government was already seized of exploring options to address the issues of American business lobby.

Braving a strong non-proliferation lobby across world, American diplomats say their government had gone all the way to help India to get waivers at the Nuclear Suppliers Group (NSG) and also concessions at the International Atomic Energy Agency (IAEA) in the hope of American businessmen securing contracts over net 10-15 years to address India's energy concerns.

Officials associated with preparing agenda for the meetings say, various options were being considered in the corridors of powers to complete the nuclear deal and they will be conveyed, in case the Prime Minister and his delegation is quizzed on the progress. The deal has mainly got stuck due to the enactment of Civil Liability for Nuclear Damage Act, 2010 (CLNDA). Nuclear expert G Balachandran believes the provisions of the CLNDA have not only stalled sales of nuclear reactors from the US, but from other major suppliers as well. "India has not been able to finalise even a single commercial contract for the import of a reactors from any of the countries. The only nuclear cooperation that India has been able to conclude with any of the countries with whom it has nuclear cooperation agreements is in respect of nuclear fuel which would not have any implication for application of CLNDA," he said.

The provision of this Act which has so far stood in the way of reactor transfers from abroad, has been the section on Right of Recourse (Section 17 of the Act) which makes supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services responsible for any catastrophe. According to Balachandran, this section is against the letter and spirit of the three major international conventions on nuclear liability- the Paris Convention, the Vienna Convention, and the Convention on Supplementary Compensation (CSC) in addition to being not part of any other country's nuclear liability laws- as also against the provisions of the various bilateral agreements.

The options now being discussed and being firmed up include an offer limiting liability clause to fixed years, as life of a nuclear reactor normally is 40 years. Also an option of amending the CLNDA is also on cards to remove Sec. 17(b), but it will be politically difficult and may be difficult to get it through Rajya Sabha, where the NDA doesn't have numbers. A legal opinion secured by the government from law ministry includes that the Nuclear Power Corporation of India Limited (NPCIL) as an operator should be permitted to forgo the Right of Recourse, but not the others. Another option on the table is for the supplier to take an insurance or financial security for the amount of the liability, which so far exists only for the operator.

The more easy option, on which the Modi government is banking is looking at the Supreme Court to declare the CLNDA unconstitutional. The court is already hearing two suits challenging the constitutional validity of the CLNDA. In such a case, according to Balachandran a status quo ante will prevail and NPCIL will be able to enter into contracts with Indian suppliers, as it has been doing for so many years, absolving them of any liability for civil damage. They can probably enter into such contracts with foreign suppliers as well.