Despite Historic Pact, U.S. Firms Are Hampered in Setting Up Reactors in India

By Rama Lakshmi
Washington Post Foreign Service
Wednesday, January 21, 2009

NEW DELHI -- It took three years of diplomatic wrangling to get a controversial agreement signed late last year to allow India to participate in global civilian nuclear trade, but U.S. business executives now say there are more hurdles to overcome before they can start setting up reactors and selling fuel to India.

The largest-ever business delegation from the United States met with high-level Indian officials, lawmakers and nuclear executives last week and pored over the fine print in the historic agreement . Some executives said it would take at least two to three years to jump through the bureaucratic hoops, complete the commercial negotiations and sign the contracts.

"The passage of the 123 Agreement into law was a herculean task," said Ted Jones, director of energy, environment and enterprise with the visiting U.S.-India Business Council, referring to the nuclear accord. "But now we are seeing how much work remains to be done, and the challenge may be equally great on the U.S. side. We thought we would get down to business sooner."

Many of the delays involve U.S. nuclear companies that must comply with stringent U.S. laws that prevent them from sharing details of their technology with Indian partners before bureaucratic approval. Another is India's insistence that the United States allow it the right to reprocess spent fuel before American companies can sell reactors and fuel to India. Additionally, India needs to pass laws covering liability and patent protection before U.S. companies can do business. Rival companies from France and Russia, which do not have such restrictions, appear to be racing ahead, executives said.

Last year's nuclear agreement between India and the United States sought to end India's 34-year nuclear isolation. It was passed after the 45-member Nuclear Suppliers Group in Vienna revoked a global ban on nuclear trade with India. The landmark deal had been expected to generate business worth more than $100 billion and potentially tens of thousands of jobs in both the countries in the next two decades, when 63,000 megawatts of nuclear power will make up 7 percent of India's total power generation.

India conducted nuclear tests in 1974 and 1998, earning international sanctions, and has not signed the Non-Proliferation Treaty. India continues to produce fissile material.

As India prepares for national elections in April, the outgoing government appears to have little time to begin the process of enacting a nuclear liability law that facilitates compensation in the event of a catastrophic accident. "The liability law is a major initiative and cannot be rushed just because American companies are in a hurry. India is a democracy, and there will be a thorough Parliament debate and approval. There is not enough time before the election to do this," said Mabel Rebello, a lawmaker who met the delegation.

Rebello said the issue is particularly sensitive because of the messy experience of compensation when poisonous gas leaked from the Union Carbide factory in Bhopal in 1984 and killed more than 14,000 people. Unlike Americans, state-owned French and Russian nuclear companies do not require these laws to do business because they can claim immunity.

"The simple reality is that the French and the Russians are ahead of us. They know the sites that have been identified for them to set up business," said R. Michael Gadbaw, a member of the delegation and a professor at Georgetown University Law Center. India has assured the United States that it will give at least two sites to U.S. companies to generate a minimum of 10,000 megawatts of nuclear power. But Gadbaw said the U.S. companies do not know where those sites are. Another hurdle is amending India's atomic energy law to recognize patents for private companies. An amendment to this law may take more than a year.

On the U.S. side, companies need to comply with "Part 810" licensing requirements that govern all commercial nuclear exports. "The 810 is a permit that is required to ensure that there is no re-transfer of American nuclear information and technology from safeguarded to non-safeguarded facilities within India," said Meena Mutyala, vice president of global growth and India business leader of Westinghouse. "These are little bumps we have to walk through."

In meetings with potential partners in India, sources in the delegation said General Electric and Westinghouse kept hitting roadblocks. "We are open to talks, but there are restrictions in the American law that prevents their companies from talking openly about technical specifications of their product. And we need this information in commercial negotiations," said Sudhinder Thakur, executive director of the Nuclear Power Corp. of India, a state-owned company that has a monopoly on nuclear power generation.

Daryl G. Kimball of the Washington-based Arms Control Association said the U.S. government is still working with its counterparts in India to ensure that technology transfers can be monitored all the way through to the end-user and then certified as complying with U.S. law. But perhaps the most challenging and basic obstacle between the two governments is granting India the right to reprocess spent fuel, which India needs for its three-stage breeder reactors. Reprocessing also entails the risk of proliferation.

Jones, the U.S.-India Business Council director, said the chairman of the Atomic Energy Commission, Anil Kakodkar, told the U.S. executives that commercial ties can commence only after talks about reprocessing rights are concluded. "This means that some of the American nuclear fuel suppliers will not be able to make some very near-term sales of uranium to India directly. And India needs fuel desperately," Jones said. "But the official was clearly using this as a leverage to get the reprocessing rights."

A representative of a U.S. nuclear company who asked not to be identified said that reprocessing consent is likely to be more difficult under the new U.S. administration which may include many "nonproliferation czars."

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