Liability-shiability absurdity

Liberalise the nuclear power industry!

It is painfully hard to watch the ongoing drama over civil nuclear liability. So much is the political class—from the UPA government to the opposition BJP—engrossed in lawyerly detail, so much has the Congress party abandoned the idea of economic reforms which Manmohan Singh was once famous for, that the biggest policy issue is not even being debated.

That issue is the full liberalisation of the nuclear power sector. There is no good reason why only state-owned (or majority state-owned) enterprises should operate the engines that make electricity from uranium. Instead of quibbling over whether or not to limit liability to operators or to extend it to their suppliers, the political class and the strategic analysts who advise them should be setting their sights on amending the Atomic Energy Act to liberalise the sector and allow for a neutral regulator to supervise them.

During the thick of the debate over the India-US nuclear deal, this blog had argued that liberalising the nuclear power industry is necessary, and that the nuclear deal is an opportunity to accomplish that task. Instead, both the government and the opposition have tied themselves in a legalistic bind over the irrelevant issue of supplier liability.

Irrelevant? Largely, yes. Because in a liberalised environment, all the government needs to do is hold the operator liable, and leave it to the operator to decide how it wants to cover its liabilities.

Related Link: PRS Legislative Research’s M R Madhavan’s brief on the civil nuclear liability bill, in Pragati

Reprocessing arguments

The G-8 statement on non-proliferation does not take away the core benefits of the India-US nuclear deal

Don’t blame yourself if you have difficulty in navigating through the jargon, subtext and the writers’ agenda in the return this week of the India-US nuclear deal into the media limelight. But before you subscribe to any of the conclusions that reporter-commentators, opposition leaders and incumbent ministers want you to, take a step back and consider what the deal is about. (See A good deal, but bad politics, from August 2007)

The deal—which itself comprises of the bilateral agreements between India and the US; US domestic law in the form of the Hyde Act; and the multilateral “clean waiver” at the Nuclear Suppliers Group—allows India to import foreign reactors and nuclear fuel for generating electricity. These reactors and fuel supplies will be under an international inspection regime (called ‘safeguards’) under the International Atomic Energy Agency, which ensure that they are not used for producing weapons.

This means two things: first, provided the domestic regulatory environment is liberalised, it will be much easier for India to address the huge energy shortage by exploiting nuclear power. And second, it will free up domestic and foreign non-NSG sources of nuclear fuel for use in the weapons programme.

There is nothing in what the G-8 leaders said earlier this week that will change this. But wait, didn’t they, as Siddharth Varadarajan argues,—at the behest of the Obama administration—call for a ban on the transfer of enrichment & reprocessing (ENR) technology to India, even to safeguarded civilian facilities? Yes, but it doesn’t really matter.

It only means eight of the 45 countries of the NSG have agreed to implement a draft of a text that the NSG has not yet agreed to. The NSG is a cartel, not a treaty, and its agreements are non-binding on its members. The G-8 is a loose group, not even a cartel, less a treaty, and its agreements are non-binding on its members. France and Russia are aware that the United States disadvantaged itself as a nuclear supplier to India by hobbling itself with the Hyde Act. Are they likely to sign away a long-term competitive commercial advantage for the sake of a lofty principle? Unlikely—the prisoners’ dilemma is in India’s favour. But what if they do?

Well, it means that the fuel for civilian nuclear reactors will have to be sent back to reprocessing facilities abroad. While this might change the price of the fuel—and affect the competitiveness of the supplier of that fuel—it does not disturb the security of fuel supply.

Since India has its own indigenous reprocessing technology, the ‘ban’ on ENR exports to India, were it ever to materialise, does not affect the ability to produce fissile material for the nuclear arsenal. Even Mr Varadarajan admits that India is “technologically self-sufficient in reprocessing and enrichment technology” and its inclusion in the India-US nuclear deal was “matter of principle, positioning and ‘paisa’.” (Actually, the real problem with respect to reprocessing is not the G-8 or NSG rules, but rather, the Indian government’s lackadaisical attitude towards investing in new reprocessing facilities.)

So it turns out that even in the worst case—if the G-8 countries decide to overturn bilateral agreements, voluntarily give up their competitive advantages and prevent others from doing so—India’s energy security and nuclear programme will remain substantially unaffected.

Why the outcry then? Mr Varadarajan is right on two counts: the US government will do what it must to protect its interests, and the Indian government can’t afford to be complacent.

But unless you’ve been living in a cave you would have guessed by now that Barack Obama does not have the same view on India as his predecessor did. You will also know that Mr Obama intends to take the old arms control and non-proliferation route to nuclear disarmament. This means that the old alphabet soup of CTBT, FMCT and NPT is back on the table, and the G-8 decision is an early sign of that. Disagreements and differences of opinion are on the cards, but India is in a much better position to deal with these because of the nuclear deal, than it would have been without it.

Jumping over Mamata’s nuclear hurdle

Meet the Academician Lomonosov

Swaminomics points out that the issue of land acquisition—epitomised by Mamata Banerjee—will prove to be the real hurdle in building nuclear power plants after the India-US nuclear deal (linkthanks BOK). Mr Aiyar is right—land acquisition is an important issue. (See the December 2007 and August 2008 issues of Pragati).

But who says nuclear reactors must be built on land? The Russians are building a floating nuclear power plant (FNPP), and the first, the Academician Lomonosov, is expected to be completed by 2010.

FNPP via RIA NovostiThe FNPP will be a barge able to move with the help of a tug boat. Transportation will be done without nuclear fuel, so on the move it will be non-threatening hardware.

The FNPP will look like a small island with an area of between 7.4 and 12.4 acres. It resembles a “symbiosis” of a nuclear-powered vessel and a standard land-based nuclear plant. It could well arouse amazement and fear, as radiophobia is widespread. Nevertheless, according to Sergei Kirienko, chief of Russia’s Federal Nuclear Power Agency, “the floating nuclear power plant with several levels of protection will be much safer than a land-based one.” [RIA Novosti | See the infographic]