Friday, January 30, 2015

US likely to seek abrogation of India's nuclear liability law for the sake of "market reforms", suggests WSJ

By Our Representative
Clear indications have emerged that, following the controversial nuclear deal between President Barack Obama and Prime Minister Narendra Modi, the US would now insist that India should bend and water down the 2010 nuclear liability law, Civil Liability for Nuclear Damage Act (CLNDA). In an unsigned editorial, America's powerful business daily, "Wall Street Journal" (WSJ) has said that the deal was a "test" whether India would allow market forces to play a role in supplying nuclear technology, and if the "red tape" which still exists in the form of this liability is done away with.
Titled "A US-India Nuclear Test", the editorial praises Modi for promising "to cut the notorious Indian red tape that scares away foreign investors, particularly when it comes to liability laws", but insists, quoting top nuclear suppliers and their supporters within the US, that India should actually act.
Pointing out that this is of "crucial importance" to ensure that the two countries keep up with their promise to be “best partners”, the daily says that the 2008 "reconciliation" under which India agreed to open its civilian reactors to international inspections through the International Atomic Energy Agency (IAEA) was put to nought in 2010 with Indian Parliament "enacted liability laws that broke with international conventions and left US power-plant suppliers vulnerable to excessive criminal and civil penalties in the event of an accident."
The daily argues, "Indian concerns stemmed from the 1984 Bhopal catastrophe that killed thousands around an American-owned chemical factory. But placing liability on foreign suppliers rather than local plant operators would effectively bar firms such as General Electric and Westinghouse from the Indian market."
The editorial quotes Westinghouse CEO Daniel Roderick as telling the "Pittsburgh Post-Gazette" that with the 2010 law, “every person in India can sue you. That’s the bigger issue —- to withstand the costs of a billion people trying to sue you.” Westinghouse has been contracted to supply nuclear reactors for the proposed nuclear plant at Mithi Virdi in Gujarat. The daily further quotes former US diplomat Ashley Tellis as saying, “If litigants were able to file suit against suppliers, essentially it could destroy the whole industry.”
The 2010 nuclear liability law, the daily points out, became the main reason for the "foreign firms suspended their multi-billion-dollar construction plans in 2010." It insists, it contributed to the souring relations between India and the US: "Coupled with Indian backsliding on foreign investment in retail, insurance and other industries, along with diplomatic spats over issues such as Afghanistan, the nuclear-liability controversy contributed to years of drift in US-Indian relations."
WSJ believes, the latest nuclear deal with Modi "seeks to clear the impasse by having New Delhi work with state-backed insurers to create an insurance pool for accident victims while indemnifying suppliers against liability." At the same time, it adds, "Whether it will work is unclear." 
While Westinghouse’s Roderick has "echoed Obama in calling the pact a breakthrough", the fact is "his firm and others stressed that they haven’t seen the details", as the "difficulty is that New Delhi will implement the agreement through a form of executive action meant to avoid having to amend the 2010 liability law."
The daily insists, agreeing with what the suppliers like Westinghouse want, "The underlying law allows the government to set up an insurance pool but appears less clear on whether suppliers can be indemnified from claims by accident victims. Suppliers have previously sought amendments to the law, not simply executive action." 
It warns, "So it may be a while before any foreign firm breaks ground on a new Indian power plant."
It says, while it may be "worth celebrating the bonhomie displayed by Messrs Modi and Obama, along with the growing cooperation between US and Indian defense planners", yet "protectionist policies and political dysfunction in New Delhi continue to limit India’s growth as an economic and diplomatic power." 
Praising Modi for his ability to overcome "political resistance", the daily suggests he would hopefully overcome this problem also and go ahead with "pro-market reforms" that would allow the likes of Westinghouse to invest in nuclear generation in India.

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