India takes another step toward deals with U.S. nuclear vendors

In a step towards opening its market to the nuclear reactor vendors of western nations, India this week finally signed off on an international agreement on liability for damages in the event of a nuclear accident. The action has been pending since 2007.

India has locked out western vendors from entering its nuclear energy new build with a domestic law that imposes stiff penalties on suppliers and holds them liable long after reactor components have been installed and operated at nuclear plants.

While this action alone does not revoke the domestic law, taken together with action by India’s government to set up an $225 million insurance pool, it represents progress toward eventually making it possible for firms like Westinghouse and GE-Hitachi to sign contracts with NPCIL to build reactors for India.

The action to ratify the Convention on Supplementary Compensation for Nuclear Damage (CSC) is supported by the International Atomic Energy Agency (IAEA).

India’s external affairs ministry told western nation wire services that signing the treaty. “marks a conclusive step in addressing issues related to civil nuclear liability in India.”

In a similar set of remarks, Sekhar Basu, secretary of India’s Department of Atomic Energy, is quoted by the Bloomberg wire service as saying, “the ratification is a very important step for the comfort of foreign vendors.”

U.S. vendors was mixed and somewhat noncommittal as the domestic law is unchanged, and can only be modified or overturned by an act of India’s Parliament. That’s unlikely to happen without the full support of Indian PM Narendra Modi who’s BJP political base pushed for enactment of the legislation in the first place.

In an interview conducted by the Bloomberg wire with with R. Rajaraman, a member of the Physics faculty at Nehru University, he said the latest action by India, “will not lead to a modification of the act.” He said that in his assessment the political support isn’t there for a major change at least at this time.

Westinghouse is currently in its latest round of negotiations with NPCIL for construction of up to six 1150 MW AP1000 nuclear reactors. A company spokesman said in a statement released to the media that the ratification of the IAEA CSC “is a step in the right direction.”

Neither GE-Hitachi nor Areva/EDF were immediately available for comment.

The first two Westinghouse AP1000 units are planned for Mithi Virdi in Gujurat, with a further four proposed at the same location, which is in PM Modi’s home state.

Meanwhile, Russia’s Rosatom, which recently completed and commissioned two 1000 MW VVER reactors at Kudankulam in Tamil Nadu in southern India, has broken ground for units 3 &4 with plans for units 5 & 6.

Rosatom self-insures as an agency of a sovereign government. In the event of an accident, any payment for damages would be negotiated directly with India’s government.

By comparison, under the current Indian supplier liability law, stockholders of western nation firms would be on the hook which could result in dire financial consequences for them in the event of an operator accident.

In a separate move, Rosatom agreed to expand its use of Indian heavy industry manufacturing capabilities for the new plants. The localization agreement took place as Rosatom opened talks with NPCIL for a separate project to build six 1000 MW VVER units in the coastal state of Andhra Pradesh. Indian firms provided the turbines for the first two VVER reactors at Kudankulam.

Two GE-Hitachi 1520 MW ESBWR units are also slated for Kovvada in Andhra Pradesh, with another four proposed once the first two are built.

French state-owned Areva has been in negotiations for more than five years to build the first two of a planned six 1600 MW EPRs at Jaitpur. A recent visit to India by French President Francios Hollande did not result in any contracts. Instead, Hollande and Indian PM Modi punted the ongoing negotiations and called for them to be completed by the end of 2016.

As part of the ongoing transfer of Areva’s reactor business to EDF, the firm said the objective of the coming months will be to continue preparation with the certification of the EPR design in India by the Indian nuclear regulatory authority. Also, there are still financial, technical and local supplier relationships to be worked out to support the final contract.

Despite the limits which remain on the ability of U.S. firms to sign contracts to build reactors in India, a State Department spokesman told reporters at Foggy Bottom that it welcomes India’s signoff on the CSC.

According to India television news service NDTV, Vijay Sazawal, a nuclear energy expert who has advised the U.S. Department of Commerce on nuclear energy exports, said that the signoff on the CSC “is a big accomplishment.”

He added that it would facilitate negotiations for both Westinghouse and GE Hitachi with NPCIL for their respective projects.

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