US Secretary of State Hillary Clinton’s recent visit to New Delhi set at rest fears about the Indo-US nuclear deal that arose from the G-8 declaration in L’Aquila. Two sites have been selected in coastal Andhra Pradesh and Gujarat for the new US nuclear complexes to be established. However, one of the thorniest issues in the 123 agreement – the question of reprocessing of spent fuel, was discussed in the 21 July meeting in Vienna between high level delegations of the two countries. These consultations pertained to the agreement on ‘arrangement and purposes’ of the dedicated reprocessing facility, safeguarded by IAEA, which India would construct for reprocessing US origin spent fuel,  as stipulated in Article 6(III) of the 123 agreement embodying the Indo-US civilian nuclear deal. Significantly, nuclear fuel from France and Russia comes without any riders attached, except that the reprocessed plutonium should be safeguarded and not be diverted to military purposes.

The reprocessing rights over US origin fuel are important to India for several reasons. First, in the letter of intent submitted by the Indian Foreign Secretary to the Bush government on 8 September 2008, India promised to acquire atomic energy plants to generate 10, 000MW from American companies. Had this not been the case, Russian and French supplies would have sufficed and India would have not have accorded such high priority to reprocessing the spent fuel, especially taking into account the large amount of nuclear fuel generated by the Tarapur reactors that remains unprocessed. The fact is that the US or any other supplier for that matter, will not take back spent fuel, making reprocessing a necessity. The US itself needs to consider its reprocessing options due to lack of safe sites to dispose off spent fuel, the logic of reprocessing toxic radioactive wastes is therefore quite obvious. Moreover, if we look at the object and purpose of the civilian nuclear agreement, India has been clear about the comprehensive nature of this cooperation. Even when the NSG tried to introduce certain constraints during its meeting last year, the Indian side was clear that only full nuclear cooperation, including both front and back end operations of the nuclear fuel cycle, would be acceptable.

 

The Indian government formally requested their American counterparts to start negotiations over reprocessing rights in February this year. Under the terms of article 6(III), negotiations had to begin within six months of the request and have to be concluded within a year, which means that the two sides have till 21 July 2010 for an agreement to be reached. However, there exist possible roadblocks which the Indian side has to negotiate before an agreement is finalized.

 

First is the question of liability should an accident occur in a US supplied nuclear plant. In the letter of intent submitted by the Foreign Secretary, it was suggested that India would work towards legislating a Civil Nuclear Liability Bill, which will make Indian law on civil liability with respect to nuclear damages congruent with the International law on nuclear liability. The current international law makes the operator of a nuclear plant wholly responsible for paying the compensation in such a tragedy, allowing the supplier a free pass. If India is not able to enact such a law, it would make the entry of US companies into the Indian market almost impossible. Nuclear accidents have been clubbed in the category of limited liability cases, with an upper limit of $450 million as the compensation amount. If the desired law does not come into existence, it will be very hard for the likes of General Electric and Westinghouse to be able to get the required insurance coverage from any insurance company. Moreover, government ownership or majority stakes held by the government in French and Russian companies will make competition difficult for American suppliers. In the event of an accident, Areva and Rosatom would be bailed out by their national governments, which would step in to meet their liabilities. The private nature of American firms is thus a definite disadvantage for them.

 

Second, India and Japan have not signed a civil nuclear cooperation agreement yet. Whereas Toshiba has a majority stake in Westinghouse, Hitachi has also bought around 40 per cent shares in General Electric. Therefore, the nuclear trade policies of these companies can be reasonably expected to influence the US government’s stance on nuclear commerce with India. Given the involvement of major Japanese firms, Japanese views on the issue cannot be disregarded either. In view of Japanese reservations on nuclear commerce with non-NPT countries and Japan’s initial opposition to the Indo-US deal, stumbling blocks can be expected on this front as well.