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All Eyes on India's Nuclear Prize


The nation plans to quintuple its nuclear power capacity, but Russia and France may sew up most of the deals

NEW DELHI - After a bruising fight in India's Parliament, Prime Minister Manmohan Singh has finally pushed through a deal with the U.S. that would open the country to American nuclear suppliers. U.S. companies such as GE Energy (GE), WM Mining, and Westinghouse Electric (WEC) have long hoped to win a substantial chunk of the billions of dollars in contracts that the pact might unlock. "Everyone knows this is big," says Tejpreet Chopra, CEO of GE India. "We're just waiting to see how much capacity the government is willing to add and where."

The problem is, the Americans may get little from the deal. Instead, Paris-based Areva and two Russian companies are poised to exploit long-standing ties to New Delhi to win the lion's share of the work on the 30 or so reactors the Indians hope to build, at a total cost of some $100 billion. The Russians are already helping to build one reactor, and Areva appears likely to get a contract for another. "Historically, Russia has been a more consistent ally for India, and the French have the advantage of being world leaders in nuclear technology," says Padmanabha Chari of the Institute for Peace & Conflict Studies, a Delhi think tank.

The U.S.-India agreement would end a decade of sanctions led by Washington. Those measures, aimed at isolating India's nuclear industry, were imposed after New Delhi tested a nuclear bomb in 1998. While the French and Russians had a partial exemption, American companies have been shut out of the market entirely.

The pact had been held hostage to political squabbling in New Delhi. Communist members of Singh's coalition opposed it and walked away from the government, forcing a confidence vote on July 22. After a day of theatrics—one group dumped sacks of cash containing millions of rupees on the floor of Parliament, saying it was money the government had used as bribes to sway the vote—Singh survived. The deal now heads to two international organizations, which are likely to approve it. Its final hurdle is a vote in the U.S. Congress, where it probably has enough support to pass.

While that could open India's nuclear sector to Americans, U.S. companies are also hobbled by liability issues. Unlike most nuclear nations, India hasn't signed a treaty that created a global fund to compensate victims of nuclear disasters, so reactor-builders in India would have to shoulder the responsibility. The state-owned French and Russian companies, though, are largely immune to civil liability, while their private-sector U.S. rivals would be at risk. "GE may never sell a reactor to India if they don't get the liability issues taken care of," says George Perkovich, a nuclear expert at the Carnegie Endowment for International Peace.

The prospect of losing more huge contracts to the French and Russians has U.S. companies worried. The liability issue "is a concern," says Dennis Hays, vice-president of governmental affairs at Thorium Power, which sells technology that lets reactors run on thorium, an alternative to uranium that's plentiful in India.

Indian officials have tried to assure the Americans there will be plenty of business to go around. The sanctions have starved India's nuclear industry of uranium and equipment. And as the economy expands, New Delhi hopes to quintuple nuclear energy production. "Demand for electricity is so large," says R.B. Grover, India's chief negotiator for the nuclear deal, "that we can accommodate all countries" willing to help build capacity.


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