India May Keep Nuclear Law, Won’t Shield General Electric as Obama Visits

India is unlikely to alter its nuclear law to shield General Electric Co. and other U.S. equipment suppliers from accident claims, derailing hopes of deals during President Barack Obama’s visit starting Nov. 6.

“There is no question of tweaking or changing the law — that’s not possible,” Prithviraj Chavan, minister for science and technology, said in an interview yesterday. Rules will be set to define the responsibility of each stakeholder, he said.

U.S. companies have refrained from signing contracts for a share of $175 billion of nuclear power projects planned in India, which wants to boost atomic generation 13-fold by 2030. India enacted a bill in August that makes suppliers such as GE, whose equipment generates about one-third of the world’s power, potentially liable in the event of a nuclear accident.

Prime Minister Manmohan Singh’s government added the clause allowing compensation claims against suppliers to gain enough lawmaker votes to pass the bill before Obama’s visit.

The South Asian nation set a 15 billion rupee ($337 million) cap on payouts by state-owned Nuclear Power Corp. of India, with the government responsible for damages beyond that. After paying compensation, the atomic power monopoly can seek money from suppliers for defective equipment or material.

Unavoidable Risk

“This is the risk the American companies have to take,” said Bharat Karnad, a security analyst at the New Delhi-based Centre for Policy Research. “There is no way around it. The parliamentary act on nuclear liability overrides any obligation India may have, like the Convention on Supplementary Compensation for Nuclear Damage.”

India, which signed the convention in Vienna last week, needs suppliers, including GE Hitachi Nuclear Energy and Westinghouse Electric Co., to meet its nuclear power generation target. The signing is a positive step that provides an internationally established system of liability protection for the benefit of all parties, GE said in an e-mailed statement Oct. 29.

Westinghouse is “hopeful that India will move toward implementing a nuclear liability policy that is consistent with the international norm,” spokesman Scott Shaw said in an e-mail yesterday. France’s Areva SA didn’t immediately respond to e- mail seeking comment.

U.S. companies, trailing their French and Russian state- owned rivals, which have sovereign backing, have held talks with India’s nuclear operator.

“We’ve had a series of discussions with the U.S. suppliers and we are confident that some kind of agreement will be worked out,” Jagdeep Ghai, finance director at Nuclear Power, said Oct. 30.

France, Russia

Areva, the world’s biggest maker of atomic reactors, is awaiting French parliamentary and regulatory approvals to sign contracts with Nuclear Power. Russian companies won orders for as many as 16 nuclear reactors from India during Prime Minister Vladimir Putin’s visit to the country in March.

India won access to atomic fuels and technology in September 2008 after the 45-member Nuclear Suppliers Group lifted a three-decade ban on exports to the country on a proposal made by former President George W. Bush after the two countries signed a civilian nuclear accord.

“The main story is we have fulfilled all the commitments made to President Bush in 2005,” Chavan said, referring to obligations under the Indo-U.S. nuclear agreement. “We are hopeful that all companies will come and do business with us.”

Bhopal Overhang

The government inserted the liability clause after some political parties, including the main opposition Bharatiya Janata Party, fought attempts to shield foreign suppliers from compensation claims. Their stand was bolstered June 6 by public outrage over two-year jail terms awarded to former senior employees of a local unit of Union Carbide Corp. for their role in the 1984 Bhopal gas tragedy.

The leak of poisonous gas at the Union Carbide factory in Bhopal city killed 3,800 people. Midland, Michigan-based Dow Chemical Co., which acquired Union Carbide in 1999, says all liabilities were settled in a $470 million accord between Union Carbide and the Indian government in 1989.

“There will certainly be a discussion on the review of the existing legal environment for nuclear liabilities during the Obama visit,” said Arvind Mahajan, executive director at consulting firm KPMG India Pvt. in Mumbai. “It’s clear that the existing law has a bit of an overhang from Bhopal.”