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| G Balachandran: A sub-optimal outcome | | The supplier liability clause of the nuclear bill will hurt India's civilian nuclear programme and its dream of achieving energy self-sufficiency |
| G Balachandran / Aug 29, 2010, 00:24 IST |
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Now that the Lok Sabha has passed the nuclear liability bill, accepting all the amendments proposed by the opposition, including the controversial one about the supplier’s liability, it is time to examine the implications.
In what follows, references to foreign suppliers and governments exclude Russia, since, through an inter-governmental agreement (IGA), Russia has been assured of freedom from any liability whatsoever in the event of a nuclear accident arising out of any Russian supplies. Russia is indifferent to the nature and scope of the Indian liability bill, indeed even to the presence or absence of such a bill. Recent Indian efforts to reopen the IGA to include Russian liability have been rebuffed by Russia. India can, of course, renounce the IGA but with heavy long-term consequences, as Russia has often been the sole supporter of the Indian nuclear programme in international fora.
What about other governments and suppliers? The first issue is: Does the Indian bill fall in line with the international conventions — the Paris Convention or the Vienna Convention? Normally, it would not matter, since India does not intend to join either. However, the India-France nuclear cooperation agreement enjoins both governments to enact a nuclear liability bill in line with international conventions. France is already a signatory to the Paris Convention. So, it does matter, for India-France nuclear cooperation, whether or not the Indian bill is in line with international conventions. If the French government feels that the Indian bill is out of line, what happens to the bilateral nuclear cooperation agreement? India can demand renegotiation of the agreement. But France has been, after Russia, the most consistent supporter of the Indian nuclear programme. It is for India to decide if it wants to abrogate the French agreement as well, with potentially serious consequences to the long-term Indian nuclear programme.
We come next to the most important players in the future evolution of the Indian nuclear programme — the suppliers of equipment and systems. So far, foreign suppliers have insisted on the recipient country having a nuclear liability bill in line with international conventions, as a precondition for supplies. There is no legal requirement in any country that suppliers from those countries cannot supply to a country without an internationally accepted liability bill. It is up to suppliers to determine their course of action. So far, they have not done so. If the Indian bill is not in line with international conventions, foreign suppliers have three courses of action open to them.
First, they can refuse nuclear commerce with India. It is for India to determine whether or not this would have consequences for the long-term nuclear programme. Second, suppliers can enter into a contract with the operator which specifically exempts suppliers from any recourse action by the operator, as in the case of the Russian supplier. Such an action would in effect nullify the adverse results of the Indian bill. Of course, Parliament, being supreme in India, can pass another legislation prohibiting any Indian operator from entering into such a contract. Third, the foreign supplier may be willing to supply the Indian operator under the current bill after analysing the text of the bill and concluding that after a gap of many years, it will be difficult, in the event of an accident, for the operator to establish that ‘an employee’ of that supplier was responsible for the supply of equipment with a latent defect. It would be useful, for a prospective analyst studying the subject, to ask the French and other suppliers their reaction to the Indian bill before coming to any definitive conclusion about the impact of the bill on foreign suppliers.
What about Indian suppliers? So far, except for Tarapur, Rajasthan I and II and Koodankulum, all other nuclear power stations were supplied by Indian industry. The Indian nuclear industry is also expected to play a major role in the future expansion of civil nuclear power in India. If it too decides to stay away from the Indian market, there will be no future for any expansion of civil nuclear energy in India. Indeed, the share of nuclear power will continue to decline steadily in the absence of any new plants. The only option for the government to increase the share of nuclear power would be to establish a whole nuclear power infrastructure industry solely to service the Indian market — a very expensive and cost-ineffective alternative. Of course, Parliament can pass legislation mandating that the government should do so. If it did so, it would not be out of place, considering the types of legislation it has chosen to enact so far.
Would the public gain from this bill? Parliament has already made sure it is the public that will end up paying for all the liability claims, by making sure that there are no private operators in the field of nuclear energy generation. So, the public does not stand to gain from this bill.
So, who gets to benefit from this bill? First, the motley crowd of left parties. Since they have no chance of ever coming to power and making India’s future secure, they would rather act as surrogate parties in the attempts of those rising powers, supposedly Marxist, who would rather see India forever tied down as a rising power, rather than become one. The second group is a motley crowd of anti-nuclear activists who, both at home and abroad, have been consistent opponents of the Indian nuclear programme and the Indian nuclear science establishment, and would like nothing better than to see the internationally competitive Indian nuclear establishment reduced to a shell of its former self. This in turn would immensely satisfy the non-proliferation ayatollahs who have been critical of the Indian strategic nuclear programme, who were in the forefront of the campaign against the India-US nuclear deal, and would wish to see the Indian nuclear establishment emasculated.
Who are the losers? The future of the Indian civilian nuclear programme and, along with it, India’s dream of achieving energy self-sufficiency and energy security; the Indian public, which will see its dream of India becoming a major global power receding further; Prime Minister Manmohan Singh, who piloted the India-US nuclear deal, ending India’s isolation from international nuclear commerce, only to have it again become a subject of boycott because of his government’s inability to assert India’s national interests; the BJP, which has once and for all proved its inability to put aside narrow party interests above the national interest; Parliament, for passing legislation which, if effective, would cripple India’s growth and, if India is to grow, would have to be made ineffective by operators entering into contracts explicitly indemnifying suppliers against any liability whatsoever, in direct contradiction to the spirit of the bill.
All in all, the saga demonstrates the inability of the Indian polity to rise above sectional interests and put national interests first. When, decades ago, China was asked to enact a nuclear liability law in line with international conventions, it passed an ordinance specifying a liability limit far below the Indian limit and limited the operator’s right of recourse to very limited circumstances, in line with international conventions — all within a matter of weeks!
The author is a consulting fellow at the Institute of Defence Studies and Analyses
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