Pivotal Time for India-U.S. Nuclear Deal

Companies like GE and Westinghouse, eager to help meet India's huge energy demand, are on the sidelines while France and Russia win business

by Mehul Srivastava

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For the past three years, eager executives from U.S.-based producers of nuclear power plants have been making a beeline for New Delhi, meeting with Indian government officials and coming back to America to lobby for the passage of a controversial nuclear deal between the U.S. and India. The agreement, first announced in June 2005 but still awaiting approval by Indian lawmakers, would allow India—which has been subject to sanctions since testing a nuclear weapon 10 years ago—to buy and sell nuclear technology in the international marketplace in exchange for opening up its civilian reactors for inspections.

The prize for the American companies? More than $100 billion in new reactor construction contracts in just the next 10 years, in a market that has always been closed off to American companies such as GE Energy (GE), USEC (USU) and Westinghouse Electric. "Everyone knows that this is big," says GE's India CEO, Tejpreet Chopra. "At this point, we're just waiting to see how much capacity the government is willing to add and where."

The deal has been on hold for months, thanks to opposition from members of Prime Minister Manmohan Singh's coalition government. Singh's decision to continue with the deal plunged the country into a parliamentary crisis two weeks ago, as his communist allies withdrew their support, decrying the deal as American imperialism. The Congress-led coalition faces a confidence vote in Parliament on July 22. If the government survives—and it's expected to, having replaced the left parties with smaller regional allies—it will take the deal to the International Atomic Energy Agency in Vienna, which must approve it before the U.S. Congress can vote on it.

Waiting for India to Sign the CSC

The delays have taken their toll, though. For the U.S. executives who have been impatiently awaiting the deal's passage, it's becoming clear that when the Indian government finally hands out contracts for up to 30 new nuclear reactors of up to 1,200 megawatts each, U.S. companies might not be at the front of the line.

Instead, French and Russian companies like Areva NP SAS, Atomenergoproekt, and ZAO Atomstroyexport are already taking advantage of their long-standing ties with India's nuclear community, and the fact that India has yet to sign the Convention on Supplementary Compensation (CSC). That's an international treaty that created a global pool of money to pay victims of nuclear disasters, and since India's not a party to it, any American-built reactors would have to shoulder their own civil liabilities—a cost that would likely prove prohibitive. Russian and French state-owned competitors wouldn't have that problem, since those companies could claim sovereign immunity in case of an accident. "GE may never sell a reactor to India if they don't get the civil-liabilities issues taken care of," says George Perkovich at the Carnegie Endowment for International Peace and the author of India's Nuclear Bomb: The Impact on Global Proliferation.