NUCLEAR CRISIS:

Japan disaster refuels liability debate in U.S.-India pact

Nuclear-powered nations are taking a hard look at safety in the wake of Japan's struggle to stave off a meltdown. But as the thorny question of liability emerges, a push to reassess who pays for post-disaster rebuilding could flare up in India -- where the United States hopes to gain from a nascent nuclear boom.

Six months after India left the door open for suppliers to shoulder cleanup costs after an accident, breaking from international precedent that gives nuclear operators that role, the country is still working on a solution to its liability puzzle.

The Obama administration is keen to see the Indian liability law changed, warning that any supplier burden could jeopardize investment gains teed up by the U.S.-India civil nuclear pact in 2005, but the Japanese crisis stands to throw a wrench in that effort.

"If it was proved over time that an act of God was exacerbated" by a flawed design in the reactor model used at Japan's Fukushima Daiichi plant, "that finding would definitely impact the liability debate in India," said Ashley Tellis, a former State Department adviser who helped secure the 2005 nuclear agreement.

"But if such a finding is not forthcoming," added Tellis, now a senior associate at the Carnegie Endowment for International Peace, "the tragedy itself has no bearing on the debate over liability."

Amid that uncertainty over how much of the radiation seeping from the Fukushima plant could have been kept in check, a heated debate has erupted in India over the evolution of its still-undersized nuclear industry and the implementation of its 6-year-old deal with Washington.

Emboldened anti-nuclear activists marched on the Indian Parliament today, and the WikiLeaks website gave critics more fodder this week by releasing a U.S. diplomatic cable that reported money was offered to lock down Indian legislators' support for the nuclear pact.

"The Indian liability legislation was the outcome of a difficult parliamentary process," Brahma Chellaney, a professor at the New Delhi-based Center for Policy Research and former adviser to India's national security council, said via email.

"Since then, the government has been weakened by scandals. ... In this light, it is safe to say that the Indian [liability] legislation will not be amended to accommodate the interests of GE and Westinghouse."

Chellaney's invocation of two top U.S. suppliers as behind the quest to tweak Indian liability rules reflects a burgeoning argument in the South Asian nation. As French and Russian state-supported nuclear companies press on with lucrative deals in India, it may well be "American firms that stand to lose the most" if the liability law stays intact, said Rupa Subramanya Dehejia, who writes the Economics Journal column for The Wall Street Journal's India edition.

"With the interest of so many non-U.S. actors, the Indian government's sense would seem to be that it's a buyer's market and lack of U.S. participation may be something it can live with in the short-run," Subramanya Dehejia said via email, adding that the Japanese crisis makes the already tough task of reopening the liability rules "much more difficult politically."

Should the prospect of nuclear suppliers and operators battling in court over any Indian safety lapse dissuade U.S. companies from entering that country's market, it would compound the financial blow already expected within the industry as a result of the Fukushima crisis (E&ENews PM, March 24).

Yet Indian energy officials take a more sanguine view of their liability framework, even as the Japanese government prepares to ask taxpayers to foot the bill for its looming cleanup challenges. India aims to shift the liability burden away from parts suppliers during the process of drawing up nuclear contracts, Tellis explained, effectively adhering to worldwide convention without having to change its laws.

"We believe that liability legislation is an issue that has been settled and doesn't pose any uncertainty," Ravi Grover, director of strategic planning at India's Department of Atomic Energy (DAE), said via email. "[W]e are sure that vendors will not have any problem in engaging with India."

Safety still in the mix

Liability may be the most internationally sensitive question for India, but the issue of responsibility is inextricably tied to safety.

Even before the full extent of the Japanese crisis was known, India reassured the public that reactors in its 20-strong nuclear fleet have shut down safely after a recent earthquake and tsunami.

Prime Minister Manmohan Singh followed by ordering a safety review of the nation's nuclear plants, a check similar to the one now under way at the U.S. Nuclear Regulatory Commission (E&ENews PM, March 17).

But nuclear oversight in India does not follow the U.S. model, which saw the Nuclear Regulatory Commission split off as an independent safety regulator in 1974 and the Energy Department remain in charge of promoting nuclear development.

India's Atomic Energy Regulatory Board (AERB), as its former Chairman Adinarayan Gopalakrishnan explained, more closely resembles the U.S. offshore drilling system that drew jeers after the Gulf of Mexico oil spill: safety and promotion under one roof.

"The AERB, which is to oversee nuclear safety in India, is not an independent body," Gopalakrishnan said via email. "AERB is answerable to the DAE, which in turn also runs the [Nuclear Power Corp. of India Ltd., or NPCIL], which will be setting up all nuclear plants."

As a result, Gopalakrishnan added, the Indian public "has no faith that their safety is the prime focus of the AERB, nor do they believe that the NPCIL will faithfully bargain cost, performance, and liability issues with the nuclear companies in a corruption-free environment. All this is leading India speedily towards large economic losses and a sharp increase in the potential for hazardous reactor accidents."

Tellis, the former State Department official during the U.S.-India nuclear talks, countered such safety warnings by pointing out that even while operating in a de facto nuclear vacuum, India has successfully run its 20 reactors without a major accident.

"Though they have been forced to run these programs entirely indigenously since 1974, they have maintained a decent safety record," Tellis said of Indian nuclear regulators. "They have pursued that with self-interest. [If there were a serious incident], all their own plans would go out the window."

And if a Japanese-style nuclear calamity were to hit India, the volatile liability debate ultimately could prove irrelevant. India's law exempts operators from paying any damages directly linked to an "exceptional" natural disaster -- language similar to the Japanese rules that are likely to leave taxpayers on the hook.