MAC: Mines and Communities

Indo-US pact: the dirty deal behind the beaming smiles

Published by MAC on 2015-01-29
Source: Nityanand Jayaramn, NRDC

The USA-based Natural Resource Defense Council has just lauded a recent "pact" between those the leaders of the world's two biggest democracies, India and the USA, which heralded a sunny future for clean energy in the world's second most populous state.

Maybe it will – maybe it won't.

But another, distinctly darker, deal has been made between the two states - one  that would massively promote India's nuclearisation.

In the following article, leading Indian social critic, Nityanand Jayaraman, exposes some of implications of this.

He says it will furher further weaken safeguards against nuclear arms proliferation; accruing huge (and potentially illegal) profits to foreign plant and equipment suppliers who won't  be liable to bear the bulk of costs, if failure or disaster (á la Fukushima) were to occur.

The ‘breakthrough’ in Indo-US nuclear deal will bleed Indians every which way

The taxpayer will be made to pay to cover US companies’ untested
technologies and the expensive electricity they generate.

Nityanand Jayaraman


29 January 2015

Two recent unrelated events formed a subtle connection in my mind. On 25 January, India and the United States announced a “breakthrough” in negotiations to operationalise the long-stalled nuclear deal. On 26 January, eminent cartoonist R K Laxman, the creator of the much-loved “Common Man”, died. The Indian and American governments, and GE and Toshiba Westinghouse, see the “breakthrough” as cause for celebration. If American corporations are sufficiently convinced to follow through and supply nuclear power plants to India, the common man (and woman) – namely, Indian taxpayers, electricity consumers and communities that host the plants – may well get the wrong end of the stick.

Here’s why. The Indo-US civil nuclear deal was signed by George Bush and Manmohan Singh in 2008. As per the deal, India agreed to separate its civilian and military nuclear activity and open up the civilian part to inspection by the International Atomic Energy Agency. In return, the US offered to resume full nuclear trade with India, ending its nuclear ostracism.

A thankful India carved out two large chunks of real estate in Mithi Virdi, Gujarat, and Kovvada, Andhra Pradesh, and offered them to two American multinationals to set up nuclear power plants. Toshiba-Westinghouse was given the Gujarat site for building six AP1000 reactors of 1100 MW each. GE-Hitachi plans to set up six units of 1594 MW each at the Kovvada site. Both projects involve untested technologies. In both instances, public sector Nuclear Power Corporation of India will be the operator.

Damages to run into billions

But two thorny issues have held up the export of nuclear technology from the US to India. First, US domestic law requires tracking by US authorities of nuclear supplies made to countries like India that have not ratified the Non-Proliferation Treaty. India found the requirement unduly intrusive as it was in addition to International Atomic Energy Agency verification.

Second, the Indian Civil Liability for Nuclear Damages Act provides for two-part recourse – through Section 17(b) and Section 46 – against nuclear equipment suppliers if the nuclear plant blows up.

India is not alone in providing such avenues. Japan, Austria, Switzerland and Germany have actually gone one step further and even removed liability caps. This is in line with the realisation that damages arising from nuclear accidents can run into billions of dollars, including compensation, relocation and rehabilitation, environmental remediation and lost trade due to contaminated agricultural and marine produce.

A study released in 2014 by researchers from Ritsumeikan University and Osaka City University said the Fukushima disaster will cost $105 billion or twice the predicted damage in 2011. This figure does not include the cost of decommissioning of reactors or safe disposal of the contaminated material and wastes. The researchers point out that the increased costs would be passed down to taxpayers and electricity ratepayers through increased tariffs. Belarus, which was worst hit by the Chernobyl disaster, has spent at least $235 billion over the last 30 years on relief, rehabilitation and clean-up. That is more than twice the size of the Indian nuclear market that American corporations are hoping to tap into.

Scrapping even limited liability

Indian law – CLNDA – is already weak. But American and Indian private equipment suppliers – like Westinghouse, L&T, JSW Steel and Tata Power – feel it is not weak enough. Section 17(b) of the Indian Act allows the operator to sue equipment suppliers. The Rules to the Act, however, limit supplier liability to Rs 1,500 crore in damages or the value of the contract, whichever is less. Section 46 of the Liability Act potentially exposes suppliers to unlimited tort liability under relevant Indian laws. However, under Section 17, only the operator can sue, and only if such a provision is expressly made in the contract.

Winning the suit is conditional to proving deficiencies in the material or equipment supplied or services rendered. After all this trouble, if the value of the contract with the supplier of the equipment that caused the accident is only Rs 5 lakh, then regardless of the extent of damage caused by that flawed equipment, Rs 5 lakh is all the operator is entitled to get from that supplier. A writ petition challenging the constitutional validity of the Act is pending before the Supreme Court.

The Indian government has indicated that it will do away with even this limited liability.

In a twist of Republic Day irony, Obama and Modi have opted to use backroom deals and executive discretion to bypass the spirit and intent of their respective legislatures. The US president says he has found a way to exempt supplies to India from US inspections meant to ensure non-proliferation goals. In return, the Indian prime minister has suggested that a publicly funded insurance pool will be set up to indemnify foreign suppliers and cover the liability under Section 17(b). Section 46 is sought to be neutralised through a legal opinion offered by the Attorney General.

Insurance burden on Indians

Declarations by Indian and US negotiators and the cautious optimism of industry players in response to the “breakthrough” make it appear as if only a few minor issues remain to be ironed out. It is made to seem as if once that is done, US multinationals like GE will “bring good things to life” and nothing will stand between 400 million Indians without electricity and their first light bulbs.

India’s nuclear establishment too continues to exude its typical optimism, unfazed by the sorry reality of having installed less than 5000 MW of ill-functioning nuclear capacity in 60 years. An upbeat article in Business Standard cites several establishment experts, including former Nuclear Power Corporation of India chairman S K Jain, who believe that most of the difficulties have been sorted out, and that the Kovvada and Mithi Virdi projects will now gain momentum.

But as things stand, the prospects of getting American nuclear technology to light up Indian homes are dim. The insurance pool arrangement is commercially shaky and the protection offered by the Attorney General’s opinion against Section 46’s tort liability is legally fraught.

Details about the insurance pool are not available yet. But if it is set up, Indian taxpayers will be made to pay to cover risks associated with GE and Westinghouse’s technologies. A Reuters report talks of a kitty of $244 million, with the government-run General Insurance Corporation of India and a few public sector companies contributing one half and the government contributing the other. The Indian taxpayer will have to pay even if the plants do not blow up. If the supplier is asked to contribute to the pooled fund, that increased project and electricity cost would be passed on to Indian consumers. Anyway you cut it, we are screwed.

The Price-Andersen Act in the US also places a similar burden on American taxpayers. Cato Institute, a free-market think tank, estimates that this translates into a subsidy of 2 to 3 US cents (Rs 1.20 to Rs 1.80) per unit of nuclear electricity generated. Another calculation pegs the annual subsidy per American reactor at about $30 million.

More expensive electricity

Financially, solar and wind energy are already becoming more attractive than nuclear. Electricity from these renewable sources cost Rs 8 and Rs 4.5 per unit respectively, according to a report by solar think-tank Bridge to India. Renewables are quicker to erect and are not as politically contentious as nuclear. In contrast, the Mithi Virdi project has run into serious opposition from local residents and farmers. If it is ever built, electricity from the Westinghouse reactors will cost Rs 12 per unit.

Mithi Virdi power is too expensive for most utilities to afford even without the cost implications of a pooled liability fund. What then are we to make of this pursuit of expensive, untested American reactors? Is the government really serious that Rs 12 per unit electricity will light up indigent Indian homes? Or is all this merely an orchestrated pirouette in a more elaborate Indo-US diplomatic choreography? Is this about India’s electricity future, or its aspiration to be included in the club of nuclear big boys?

Answers to these questions aside, the stalled deal, the subsequent negotiations and the dubious “breakthrough” that the media refers to offer several sobering realisations. Both Obama and Modi consider corporations and not the people of Bhopal to be the real victims of the 1984 Bhopal disaster. Both leaders agree that a nuclear disaster is real enough, and that it is a matter of bilateral priority to protect – not communities and the environment – but the operators and suppliers of nuclear equipment in the event of a disaster. As for dealing with the aftermath of a nuclear catastrophe, the heads of the two great democracies seem to contend that Indians will make do with some compensation – about $480 million – from their own tax moneys.

Nityanand Jayaraman is a Chennai-based writer and social activist and a volunteer with the Chennai Solidarity Group for Koodankulam Struggle.

Modi and Obama's promising first steps

Anjali Jaiswal & Meredith Connolly

Natural Resources Defense Council

29 January 2015

Amidst the Republic Day celebrations on Monday, President Obama and Prime Minister Modi signaled a stronger relationship in fighting global climate change and growing clean energy markets. The leaders of the largest democracies in the world agreed to cooperate on phasing down heat-trapping, hydroflurocarbons (HFCs), expanding clean energy markets, and enhancing bilateral climate change discussions toward achieving an ambitious agreement in Paris later this year.

Working towards robust global clean energy markets advances both leaders' shared ambitions and builds a low-carbon economy in a country on the frontlines of climate change impacts. The commitment to advance the joint research and deployment projects provides greater opportunity for business and academic cooperation on solar, wind and energy efficiency.

As NRDC's President Rhea Suh urged in her letter to President Obama and wehighlighted before the visit, cooperation on clean energy technology, finance and policy is essential to scaling up these markets, providing clean energy access and fighting climate change. Increasing efforts on climate resilience and air quality are also positive elements to protecting human health and fighting climate change.

Stronger climate change cooperation - including an HFC phasedown

Agreeing on bilateral cooperation to phase down HFCs under the Montreal Protocol is significant to fighting climate change and builds momentum toward greater cooperation to reach a new international phasedown agreement. Ahead of this trip, we highlighted that next steps could include continued task force discussions on technical knowledge exchange, a phasedown timetable, and an amendment to the Montreal Protocol. The US-India joint statement explicitly relies on the Montreal Protocol:

"The President and Prime Minister reaffirmed their prior understanding from September 2014 concerning the phase down of HFCs and agreed to cooperate on making concrete progress in the Montreal Protocol this year."

The agreement on HFCs shows that India and the United States, along with other countries around the world, are prepared to help phase down these super greenhouse gases under the Montreal Protocol. As NRDC and the Council on Energy, Environment and Water (CEEW) research shows, a growing number of Indian companies are leapfrogging to coolants in air conditioners and refrigerators that don't heat the planet. Business cooperation with international companies, including those in the US, China, Japan and elsewhere can advance the HFC phasedown.

Expanding clean energy partnerships and financing

President Obama welcomed Prime Minister Modi's increased goal of 100 gigawatts (GW) of solar energy by 2022 with a new influx of financing from the US Export-Import Bank among others and by enhancing energy efficiency and renewables cooperation.

American companies are eager to increase their participation in this growing market – US-based SunEdison and First Solar offer early successful examples. Our work with partners in India shows that the potential is huge to tap into India's vast solar resources. It can create jobs, help India expand energy access, and help reduce pollution. Based on initial research by NRDC and CEEW, and given the limited data available in India, we estimate that at least 23,884 cumulative jobs in the solar industry from 2011 to 2014 – solely from commissioned projects currently producing electricity – were generated locally in India. Energy efficiency is also a tremendous energy resource in India and globally, as research from NRDC and the Administrative Staff College of India shows.

The new US-India joint statement details expansion of clean energy partnerships and financing:

– Expanding Partnership to Advance Clean Energy Research (PACE-R): A renewed commitment to PACE-R, including extending funding for three existing research tracks of solar energy, building energy efficiency, and biofuels for an additional five years and launching a new track on smart grid and grid storage.

– Expanding Partnership to Advance Clean Energy Deployment (PACE-D):Both the countries intended to expand our current Partnership to Advance Clean Energy Deployment (PACE-D) through increased bilateral engagements and further joint initiatives to expand cooperation in support of India's ambitious targets in renewable energy.

– Accelerating Clean Energy Finance: Prime Minister Modi emphasised India's ongoing efforts to create a market environment that will promote trade and investment in this sector. President Obama welcomed India's ambitious solar energy goals and encouraged India to continue its efforts to increase trade and private investment in this sector. President Obama conveyed the potential availability of US Government official financing in this area, consistent with its policies, to support private sector involvement for those entities in contributing to India's clean energy requirements.

– Demonstrating Clean Energy and Climate Initiatives on the Ground: Additional pilot programs and other collaborative projects in the areas of space cooling, super-efficient appliances, renewable energy storage, and smart grids.

– Concluding MOU on Energy Security, Clean Energy and Climate Change: Both countries concluded negotiations on a five year MOU to carry this work forward, to be signed as early as possible at a mutually agreed upon date.

Accelerating climate adaptation and air quality efforts

With 2014 as the hottest year on record and with climate change impacts already bearing down on vulnerable communities across the globe, President Obama and Prime Minister Modi also announced partnerships to develop climate resilience tools and improve air quality in India's cities. Early warning systems and preparedness plans are vital to saving lives from extreme weather. The city of Ahmedabad in western India along with the Public Health Foundation of India-Indian Institute of Public Health, NRDC and others, launched the Ahmedabad Heat Action Plan, a pilot early warning system and adaptation plan addressing extreme heat in one of India's rapidly urbanising cities.

The new US-India joint statement details the initial cooperation on climate resilience and air quality:

– Initiating Climate Resilience Tool Development: Jointly undertaking a partnership on climate resilience that will work to downscale international climate models for the Indian sub-continent to much higher resolution than currently available, assess climate risks at the sub-national level, work with local technical institutes on capacity building, and engage local decision-makers in the process of addressing climate information needs and informing planning and climate resilient sustainable development, including for India's State Action Plans.

– Launching Air Quality Cooperation: Implementing EPA's AIR Now-International Program and megacities partnerships, focused on disseminating information to help the urban dwellers to reduce their exposure to harmful levels of air pollution, and enable urban policy planners to implement corrective strategies for improving Ambient Air Quality in the cities keeping in view health and climate change co-benefits of these strategies.

Both countries signaled they are ready to help secure a strong global agreement this December in Paris. The strong strategic partnership on climate change and clean energy that we've seen President Obama and Prime Minister Modi building in the last six months is critical to reaching a global agreement.

Anjali I. Jaiswal is a senior attorney in the NDRC San Francisco office and works on the litigation team and India initiative. Meredith Connolly is an energy law and policy fellow at NDRC. Reprinted with permission from the US Natural Resources Defense Council.


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