Obama-Modi Nuclear ‘Breakthrough’ Has CEOs Wary of Fine Print – Businessweek

President Barack Obama and Indian Prime
Minister Narendra Modi hailed a breakthrough meant to spur a
surge in civilian nuclear projects. Equipment suppliers are
keeping the Champagne on ice.

Westinghouse Electric Co., the Monroeville, Pennsylvania-based nuclear builder owned by Toshiba Corp. (6502), will need to study
an offer by India’s government to create an insurance pool that
would help shield equipment suppliers from liability in the
event of an accident, Chief Executive Officer Danny Roderick
said. It will then look for commercial agreements with Indian
companies to build nuclear power stations, he said.

“We need to understand what I’ll call the fine print of
the insurance,” Roderick, who says he’s been traveling to India
for 15 years trying to promote nuclear power stations, said in a
phone interview from New Delhi. “Let’s look at the total
package of all the things that the Indian government is talking
about now on how they’re going to address nuclear liability.”

Modi’s administration on Sunday said it plans to set up a
7.5 billion rupee ($122 million) insurance pool to shield
nuclear plant operators and suppliers from liabilities following
accidents. India’s government would add to the pool at a later
date “on a tapering basis,” according to the foreign ministry.

Obama said the nuclear agreement was a “breakthrough” on
an issue that Modi called “the centerpiece of our transformed
relationship.” Neither provided details on how it would work.

Bhopal Legacy

India is one of the few nations that doesn’t exempt nuclear
suppliers from accident liability. That stems from the world’s
worst industrial accident in the central Indian city of Bhopal,
where more than 10,000 people were killed or injured in a 1984
chemical leak from a Union Carbide Corp. pesticide plant.

Public support for the liability legislation only hardened
after the 2011 Fukushima meltdown in Japan, which forced 160,000
people from their homes and will cost an estimated $196 billion
to clean up.

As part of the U.S. delegation, Roderick is scheduled to
meet Modi and Obama on Monday evening. He plans to tell them his
company needs “very strong government support to remove the
obstacles so we can move this agreement forward and not hit
another roadblock immediately for something else,” he said.

India needs more electricity, and plans a $182 billion
expansion of its nuclear industry to provide it to the roughly
400 million people who live in the dark. Modi is looking to tap
all forms of energy, including solar and wind, to ensure every
home in the country can run at least one light bulb by 2019.

‘We Think’

“We think we came to an understanding of the liability”
issue, U.S. Ambassador Richard Verma said. The deal “now opens
the door for U.S. and other companies to come forward and help
India develop its nuclear, non-carbon-based energy production.”

Roderick declined to say if the measures announced on
Sunday were adequate, adding that the government would have to
determine the size of the insurance pool. He said any liability
should be channeled to the operator to help those affected
immediately and avoid “years and years and years” of lawsuits.

GE Hitachi Nuclear Energy, a partnership between GE and
Tokyo-based Hitachi Ltd. that provides reactors and services to
the industry, applauded the move to resolve the issues even as
it waits for more details.

“We look forward to reviewing the governmental agreement
in due course,” GE said in a statement provided by spokesman
Dominic McMullan.

‘Tremendous Asset’

“What they’re going to want to see is that there’s follow
through,” said Ben Rhodes, U.S. deputy national security
adviser, when asked what companies are looking for in the
nuclear deal. “We’ll continue to share that information with
them and to ensure that we are doing our best to advocate for
our businesses. GE and Westinghouse would be a tremendous asset
here in India.”

Westinghouse has been allotted a site in Modi’s home state
of Gujarat to build a nuclear power station, Roderick said. The
plant can have a capacity of 10,000 megawatts and will require
about eight of the company’s AP1000 reactors, he said.

Two reactors will be set up initially following any
commercial agreements. Westinghouse is unable to provide a final
price for the reactors because the contract terms aren’t final
yet, he said.

As part of the deal, the U.S. dropped its earlier
insistence that it be able to track the nuclear material
provided to India, a requirement that went beyond standard
International Atomic Energy Agency safeguards, according to
Indian press reports.

Unanswered Questions

“Tracking was never going to fly as Indian public opinion
would see it as intrusive,” said K.C. Singh, a former diplomat.

It appears the U.S. “caved” on a legal requirement for
extensive monitoring to ensure that no U.S. technology is
diverted for Indian military purposes, according to Daryl
Kimball, executive director of the Washington-based Arms Control
Association, an advocacy group.

Still, for many companies it may prove inconsequential
without clarity on what would happen if unlimited claims come in
the wake of a disaster at a nuclear plant, according to Debasish Mishra, Mumbai-based partner at Deloitte Touche Tohmatsu.

“This is a government-to-government agreement and
ultimately the final deals will be signed between companies,”
he said. “There’s a feeling that not everything has been
resolved.”

To contact the reporter on this story:
Rakteem Katakey in New Delhi at
rkatakey@bloomberg.net

To contact the editors responsible for this story:
Alister Bull at
abull7@bloomberg.net;
Daniel Ten Kate at
dtenkate@bloomberg.net
Daniel Ten Kate, Sunil Jagtiani

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