The draconian provisions of the act, which affect component suppliers long after their products are installed in operating reactors, has excluded U.S. firms from India’s nuclear market. It has stalled development of India’s nuclear power sector. The nation’s political establishment appears stuck in the mud over it.

The Hindu newspaper reported 11/28/14 that the the U.S. is taking a tough position on negotiations for the civil nuclear deal. India has refused to modify the nuclear liability law that prevents U.S. firms from doing business in India. The law has been a sore point since it was passed, and despite continued pressure from the U.S., India has refused to budge.

Now with a second planned trip by President Obama to India in January 2015, the U.S. State Department is trying to head off an second embarrassment over the law. In November 2011 then Indian PM Singh simply shrugged off requests to use the President’s visit to open India’s markets to U.S. firms. President Obama left India empty handed as far as nuclear deals were concerned.

So this time the State Department is speaking up.

“India needs to come up with a solution that is workable for the companies to have a viable opportunity to work in India,” said U.S. Assistant Secretary of State Nisha Biswal (right) in a statement to The Hindu.

Asked if a breakthrough was possible ahead of Mr. Obama’s visit, Ms. Biswal said,

“I see there is a lot of hard work ahead and I would not be sanguine about announcing any early breakthrough. What is required right now is not a lot of unrealistic expectations.”

According to the Hindu, during PM Modi’s visit to the U.S. in September, he and Mr. Obama agreed to set up a ‘contact group’ to work through the differences. So far little has come of it.

Within India’s nuclear establishment there is considerable angst about the law. Former Atomic Energy Commission Chief Anil Kakodkar spoke out Oct 15 telling a conference of his colleagues that little significant new nuclear capacity will be added to India’s electric grid unless there is an “urgent corrective action regarding the nuclear liability law.”

He said the outlook for nuclear energy in India is bleak because domestic firms don’t want anything to do with the industry due to long-term uncertainties that the current law places on suppliers.

While U.S. suppliers have been urged by the State Department to be patient while the liability law issues are worked through, it appears to some that India’s stand fast position on the law serves two purposes.

First, India has not signed the Nuclear Nonproliferation Treaty despite global pressure to do so. Japan has told India it will not sign a civil nuclear deal with India until there is progress on this issue.

For its part, India sees its national security prerogatives relative to Pakistan and China as trumping domestic concerns. Yet, in August 2012 two days of power outages left 670 million people without electricity.

India is now importing uranium for its civilian reactors from Australia having gotten approval to do so from the Nuclear Suppliers Group (NSG) in 2007. The Bush Administration pushed the deal on the assumption it would open India’s nuclear markets to U.S. firms. Just the opposite occurred and it has been a sore point ever since. Essentially, the U.S. went to bat for India with the NSG and got stone walled for it in terms of access to markets.

Second, Within India a desire to remain “nonaligned” and independent of the West, has led to symbolic stances with limited economic benefits. Some Indian political and industry interests do not want foreign vendors building and maintaining India’s civilian nuclear power reactor infrastructure. This has led to efforts to ramp up construction of India’s 700 MW PHWR heavy water reactors.

India has made some long-term R&D investments in fast reactors, but only one is nearing completion to begin test operations. Also, despite having abundant thorium reserves, in the three decades India could not import uranium, it made little progress in developing thorium based fuels for reactors.

Update: For a good review of how the domestic side of India’s complicated politics produced an intractable situation with the nuclear liability law, see this analysis by Jaideep Prabhu.

Elsewhere in India only French state owned Areva and Russia’s Rosatom have a presence in the country’s nuclear establishment. Areva has not yet broken ground for two of a planned six 1600 MW EPR units at Jaitapur on India’s west coast.  Rosatom recently completed and commissioned two 1000 MW VVER units at Kudankulam on India’s southern most coat in Tamil Nadu. Turbine problems recently took Unit 1 offline. It is expected to return to revenue service in December.

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