A Secondary Role for U.S. in India's Nuclear Future

Meanwhile, American energy heavyweights such as General Electric are losing the critical competitive edge of time to France's Areva and Russia's Rosatom as the deal awaits ratification by the U.S. Congress. GE built and helped run India's first nuclear plant at Tarapur, near Mumbai, but pulled out in 1974.

But perhaps the biggest barrier for the Americans is the lack of clear nuclear liability laws in India in the event of an accident.

"Our nuclear industry was in the government sector until now. And we did business with other government companies in Russia and France. Decision-making, regulatory processes were not transparent at all," said V. Raghuraman, principal energy policy adviser at the Confederation of Indian Industry, which spearheaded advocacy for the deal.

American business delegations to India have repeatedly said that unless protected under liability laws, U.S. companies would find it impossible to sell reactors in India.

"American companies are always concerned about lawsuits in U.S. courts and liability issues," said Omer Brown, a lawyer working to promote a new international legal framework for nuclear incidents, called the Convention on Supplementary Compensation. "It is more of an issue for American private nuclear companies. State-owned French and Russian nuclear companies, which have sovereign immunity, can walk away and pay nothing."

The convention is meant to cover nuclear accident claims and provide a global fund to pay victims. It will activate after five or more countries, collectively having 400,000 megawatts of installed nuclear capacity, ratify it with the International Atomic Energy Agency. Four have done so -- the United States, Morocco, Argentina and Romania, with a total of 319,256 megawatts.

"Liability limitations remain very important for private sector companies operating in this area," said Karan Bhatia, a vice president for international government relations and policy at GE. In the company's view, India's ratification of the compensation convention and adoption of domestic legislation "would be the optimal way forward," Bhatia said.

Indian officials have agreed to study the proposal. But with a national election scheduled in a few months, the matter could spill over to the next government.

The volume of business opportunities for Americans is expected to swell when an Indian law prohibiting private companies from generating nuclear energy is amended. Large Indian corporations are exploring ties with U.S. and French companies to eventually secure contracts for constructing nuclear power stations and generating power, or for producing components such as generators and turbines.

But India aspires to become more than a mere market for foreign players in the nuclear industry. The country hopes to position itself as a low-cost manufacturing hub that supplies nuclear components to the world. Officials here say they also want to provide manpower to nuclear projects and help other countries decommission and upgrade old nuclear plants.

India's traditional way of doing nuclear business is also proving to be a challenge for some American companies. Indian nuclear plants have always preferred to procure nuclear fuel, the reactor and technology from a single vendor. This model worked with the Russians and the French, because nobody else wanted to conduct nuclear trade with India.

"The Indian mind-set has to be weaned out of this practice. We are trying to convince them that it is a lot cheaper to work with more than one vendor and buy them separately," said Vijay Sazawal, director of government programs at USEC, a Maryland-based supplier of enriched uranium fuel.

But Sazawal said he would not wait until the laws are amended and mind-sets change. His company is negotiating with a French nuclear power company, EDF, for business possibilities in India.

"There is a legacy of residual distrust from three decades of technology denial by the U.S.," said K. Santhanam, a defense expert who has worked in India's nuclear program. "So in the first stage, the U.S. industry can play a sub-vendor role to French reactors or join in a consortium with French companies. After all, the French will not allow Americans to run away with the lion's share."