Context

• The U.S.-India civil nuclear deal, finalised in 2008, stands as a landmark in international diplomacy and strategic cooperation.
• While the agreement paved the way for enhanced strategic and defence collaboration, it fell short of fulfilling its energy and commercial potential.
• With the onset of new US administration, it is important to explore the historic significance, and the multifaceted challenges that have hindered the deal's full realisation, alongside potential strategies to overcome them.

Historical Significance of US-India Civil Nuclear Deal: A New Era of Strategic Cooperation

• The U.S.-India civil nuclear deal (2008) marked a turning point in bilateral relations, particularly in defence and strategic domains.
• Historically, Cold War politics had estranged the two nations, but the nuclear agreement signalled a newfound trust.
• By cooperating on nuclear technology, one of the most potent and potentially destructive advancements, the two nations laid the groundwork for deeper collaboration in defence procurement, technology transfer, military exercises, and intelligence sharing.
• Without this foundational trust, the current level of interaction between the two countries would have been inconceivable.

Multifaceted Challenges Hindering the Deal's Full Realisation

• Unfulfilled Energy and Commercial Promises
  • Despite the optimism surrounding the deal, its energy and commercial goals remain largely unrealised.
  • Proponents envisioned a robust Indian civil nuclear sector powered by U.S. technology and equipment, generating employment in both nations while providing clean energy for India's burgeoning population.
  • However, the promise of six new nuclear plants announced in 2016 by President Barack Obama remains unfulfilled.
  • Clean energy from these plants was expected to reduce India's dependence on fossil fuels, a significant contributor to climate change, but bureaucratic and structural challenges have impeded progress.
• Regulatory and Security Barriers
  • One of the initial hurdles to implementing the deal was the inclusion of Indian entities on the U.S. Entity List, a trade restriction mechanism.
  • Although most entities were removed from the list following the deal, a few remained due to concerns over dual-use technology potentially falling into adversarial hands.
  • Recently, the Biden administration took steps to resolve these issues, indicating progress.
  • However, such measures alone cannot address the core problems that have obstructed the deal's full potential.
• The Liability Risk Conundrum
  • A major obstacle has been India's Civil Liability for Nuclear Damage Act of 2010, which deviates from international norms by placing liability for nuclear accidents on suppliers rather than operators.
  • This liability framework, influenced by the Bhopal gas tragedy and associated anti-foreigner sentiment, deterred U.S. suppliers like GE and Westinghouse from participating.
  • While the Indian government later introduced an insurance-based solution to mitigate supplier risks, it primarily benefited Russian suppliers whose state-backed companies enjoyed sovereign immunity.
  • U.S. companies, operating in a stricter legal and market environment, remain reluctant to accept these terms.
• Technological and Economic Challenges
  • Beyond liability issues, technological and economic barriers further complicate U.S. involvement in India's civil nuclear sector.
  • The rapidly evolving nature of nuclear technology necessitates that U.S. companies offer state-of-the-art solutions at competitive prices.
  • However, cost overruns in U.S. nuclear projects have raised concerns among Indian officials wary of burdening consumers with increased electricity rates.
  • Thus, the challenge lies not only in providing advanced technology but also in ensuring its affordability and efficiency.

Potential Strategies to Overcome these Challenges

• Resolving the Liability Issue
  • The primary roadblock for U.S. companies is India's Civil Liability for Nuclear Damage Act, which places undue risk on suppliers.
  • One possible solution involves revising the Act to align with international norms, such as those established by the Convention on Supplementary Compensation for Nuclear Damage (CSC).
  • This alignment would clarify the roles of operators and suppliers, reducing the legal risks faced by the latter.
  • Alternatively, India could expand its insurance-based mechanism by involving international insurers, ensuring robust coverage for potential liabilities while reassuring suppliers of financial protection.
• Enhancing Technological Collaboration
  • To compete effectively in India’s nuclear energy market, U.S. companies must demonstrate their technological superiority while ensuring affordability.
  • Investing in joint research and development (R&D) initiatives between American and Indian institutions could lead to innovations tailored to India's unique energy demands.
  • For example, small modular reactors (SMRs), which offer scalable and cost-effective solutions, could be a game-changer for India’s energy landscape.
  • Moreover, the U.S. could facilitate technology transfers and capacity-building programs to empower Indian industries to locally manufacture critical components.
• Addressing Cost and Consumer Concerns
  • For the Indian government, affordability is paramount.
  • Nuclear energy projects must be cost-competitive with other energy sources, such as solar and wind, which have seen significant cost reductions in recent years.
  • To achieve this, U.S. companies must streamline their project management processes, minimise delays, and prevent cost overruns.
  • The U.S. and India could also explore innovative financing models, such as public-private partnerships (PPPs) and international funding from climate-related initiatives.
  • The inclusion of green energy subsidies or low-interest loans could further enhance the financial viability of nuclear projects.
• Strengthening Policy and Regulatory Frameworks
  • A robust policy framework is critical to addressing lingering uncertainties.
  • The two governments should establish a joint task force dedicated to overcoming regulatory barriers and aligning export control systems.
  • This task force could ensure that dual-use technologies are securely managed while expediting approvals for nuclear energy projects.
  • Additionally, bilateral agreements could focus on streamlining project implementation timelines and ensuring transparency in procurement processes.
• Deepening Strategic Partnerships
  • The success of the nuclear deal should not be viewed in isolation but as part of a broader U.S.-India strategic partnership.
  • Enhanced cooperation in other areas, such as renewable energy, defence, and space exploration, could complement nuclear energy initiatives.
  • Joint efforts to address global challenges, such as climate change and energy security, would strengthen bilateral ties and reinforce mutual trust.

Conclusion

• The U.S.-India civil nuclear deal remains a testament to the transformative power of diplomacy, yet its potential remains largely untapped.
• While it has significantly enhanced strategic cooperation between the two nations, its energy and commercial promises are yet to be realised.
• Addressing regulatory, liability, technological, and economic challenges will require concerted efforts from both governments and private entities.
• The stakes are high, but so are the potential rewards, clean energy, economic growth, and stronger bilateral ties.