Barak Obama’s Visit and the Nuclear “Breakthrough”

In 2005, India and USA had agreed to work towards full civil nuclear cooperation and strengthen the nuclear non proliferation regime. US agreed to provide India access to the nuclear reactor building technology but it was on some conditions. One such condition was that India will need to separate its Civilian & Military Nuclear facilities.  Second was that India will have to ‘assume’ non-proliferation responsibilities. Third such condition was that India would protect fissile materials and nuclear technology even if it is not a part of the NPT regime.

As a follow-up to the above, India committed to identify and separate its Civilian and Military nuclear facilities and programme and file a declaration with International Atomic Energy Agency (IAEA) about its Civilian Facilities. India also agreed to voluntarily place her Civilian Nuclear Facilities under IAEA safeguards. India also agreed to continue moratorium on nuclear tests.

Consequent to this, India finalized its Separation Plan by March 2006. Under this plan, 14 out of 22 thermal power reactors were placed under the IAEA safeguards.

123 Agreement

In August 2006, India and US released the full text of the 123 agreement; which refers to section 123 of the Atomic Energy Act 1954 of United States. Atomic Energy Act 1954 is a basic American law for both the Civilian and military uses of the nuclear materials and covers the laws for the “development and the regulation of the uses of nuclear materials and facilities in the United States.  The section 123 of this act is titled “Cooperation with Other Countries”. So, when United States establishes an agreement for cooperation with any other nation, it is in accordance with the section 123 of the Atomic Energy Act of 1954 and so it is called 123 Agreement.

There were various oppositions to the 123 Agreement. One of the basic objection was that Indian government has compromised on sovereign power to develop nuclear power (also weapons, as understood).  The government had to clear in the parliament that the agreement is necessary for achieving basic objectives of safeguarding the country’s autonomy of our strategic nuclear power programme and indigenous three stage nuclear power programme and indigenous nuclear research and development. He further assured the parliament that it provides for full cooperation between India and United States covering nuclear reactors and aspects of the associated nuclear fuel cycle including the enrichment and reprocessing.

Hyde Act 2006

The Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 is known as the Hyde Act. It is basically a parent act of 123 Agreement which provides legal framework for a bilateral pact between the United States and India under which the US will provide access to civilian nuclear technology and access to nuclear fuel in exchange for IAEA safeguards on civilian Indian reactors. Thus, this act is an enabler law for resumption of full civil nuclear energy cooperation between India and United States. It was passed by the US Congress and signed into law by President Bush on 18 December 2006.

By 2008, NSG changed its guidelines and removed ban from nuclear cooperation with India. After this, the Indo-US Civil Nuclear agreement was signed into law in 2008. India was also open to sign such civil nuclear deals with other countries. Apart from US, India has entered into an agreement with Russia, Kazakhstan, South Korea, France, for co-operation in the peaceful uses of Nuclear Energy. With UK, India has made a joint declaration on Civil Nuclear Cooperation.

Civil Nuclear Liability Act

However, some more things had to be done before the real business could commence. One such thing was passing the Civil Liability for Nuclear Damage Act 2010. This act was needed so that if there is a nuclear accident, both the operator and the government was bound to provide relief to the affected population. Further, only enactment of such act would provide insurance cover to the US companies in their home country. If there is a nuclear accident, the maximum amount of liability has been capped at Rs. 1500 Crore via this act. If the liability goes beyond Rs. 1,500 crore, then the government can “bridge the gap” up to an amount of Rs. 1,110 crore. Beyond this total Rs. 2,610 crore, India will be able to access international funds under the CSC (Convention on Supplementary Compensation for Nuclear Damage). However, to do that, India needs to be a party to that convention.

Understanding the Nuclear Logjam

The logjam is on two different issues viz. ‘Right to Recourse‘ and “Parallel Safeguards“. They are discussed below:

Right to Recourse

Under the 123 agreement, one of the commitments India had made was to ensure that its liability law would be consistent with international law, mainly the Convention on Supplementary Compensation (CSC) for Nuclear Damage, which India has signed but yet to ratify. UPA government had introduced the Nuclear Liability Bill to fulfill this commitment. This law was passed with several amendments but the shape and form in which it was passed finally was not consistent with the CSC because it opened up the possibility of holding the suppliers liable in perpetuity for any damage.  Section 17(b) of this act enables the operator (In case of India its NPCIL) sue (Right to Recourse) the supplier (Foreign as well as Indian supplier) after paying compensation to the victims of nuclear damage. It can be invoked only if the accident happens due to ‘supply of equipment or material with patent or latent defects or substandard services’.  This was not acceptable to the US and as a result the deal could not be operationalized. US says that this provision is vague, open to interpretations and instead of this, India should follow the global practice and full responsibility should be of the operator not supplier.

Parallel Safeguards

Second issue is of so called “Parallel Safeguards“. The US has wanted that India should accept the nuclear-material tracking and accounting arrangements that go beyond the safeguards system that the International Atomic Energy Agency (IAEA) has approved and applied to nuclear-armed India’s civilian nuclear program. This simply means that on the top of IAEA, US would establish a bilateral safeguards system.  Under this, India is to separately track and account for the nuclear materials “by flag” i.e. by each national origin. We note that such a demand was made by Japan and Australia also, and we have so far not conceded to these demands. This is because setting up parallel safeguards in perpetuity seems to be an elaborate and expensive arrangement. Such obligations were not even envisaged in the original Indo-US nuclear deal of 2005.

Apart from the above, there is one more issue of the “Administrative arrangements” which pertain to the monitoring, handling, inspection and safeguard of the nuclear material procured from the U.S.

Anatomy of January 2015 ‘Breakthrough’

After the January 2015 visit of Barak Obama as chief guest of republic day celebrations and the following India-US summit; a breakthrough was projected in the media.
Here is the material outcome of the January visit:

• The core issue of liability stands as it was there. The breakthrough was that the US has abandoned its insistence on getting the Civil Liability for Nuclear Damage Act amended. On the other hand, to mitigate the risk of the foreign companies, India has proposed to create an India Nuclear Insurance Pool. This is basically a risk transfer mechanism, which enables the suppliers to seek insurance to cover the risk of invocation of recourse against them. Premium against Rs. 1500 crore would be 1.5 to 2 crore per annum. Premium would be paid by NPCIL to cover its liability and the Suppliers would take out separate insurance against their secondary liability at a “fraction” of the cost.
• On the issue of parallel safeguards, Modi government has so far agreed to meet almost half of what US demands; by setting up a data-sharing and material-accounting mechanism for nuclear material; but this is inadequate in eyes of US. The data collected has to be shared during annual consultations of special groups to be set up. On the other hand, US has dropped the idea of parallel safeguards.

Conclusion

The Indo-US nuclear deal marked a turning point in India-US relations. This deal also ended India’s nuclear apartheid. But ironically, this deal is still remaining unimplemented. There are a lots of misgivings. No doubt substantial progress has been achieved but current status of this “breakthrough” is that almost all issues are still pending and logjam prevails. The two countries are still locked in the negotiations.