India signs nuclear liability pact, a U.S. demand

* U.S. firms unhappy about Indian nuclear liability law

* India signs international convention ahead of Obama visit

VIENNA, Oct 27 (Reuters) - India signed an international treaty governing global civil nuclear liability on Wednesday, a step sought by Washington to reassure U.S. suppliers entering the country’s fledgling $150 billion atomic power market.

The signing took place at the headquarters of the U.N. nuclear watchdog in Vienna days before U.S. President Barack Obama visits India next month, when he will meet U.S. business leaders in Asia’s third-largest economy.

India’s parliament passed legislation in August to open up the domestic nuclear market. But its nuclear liability law also gives the right to seek damages from plant suppliers if there is an accident. India is the only country to have such a provision, which was added after wide political pressure.

The entry of firms like General Electric GE.N and Westinghouse Electric, a U.S.-based unit of Toshiba 6502.T, is seen as uncertain unless India provides more clarity on compensation liability for private operators.

The United States has pressed India to accede to the multilateral Convention on Supplementary Compensation for Nuclear Damage (CSC) to assure its suppliers that any liabilities would be in line with international norms.

There is some fear in India, which needs investment to fuel its rapidly growing economy, that signing up to the treaty could dilute its domestic provisions for supplier responsibility.

But most commentators say it will help reassure American firms that India is part of a global grid on nuclear commerce.


“The CSC is silent on the right to recourse or on the limitations. By itself the CSC does not help American companies,” said Indian political commentator Praful Biwai.

“So the Americans won’t be very happy and will continue to press for some exceptions (in the domestic law).”

The Hindu newspaper said this week the government may sign the convention ahead of Obama’s visit as a “means of short-circuiting American pressure to amend” its liability law.

But an Indian diplomat in Vienna said signing the CSC, which has yet to come into force, was part of New Delhi’s commitments under a two-year-old nuclear accord with Washington and that it would not affect the domestic legislation.

The landmark 2008 civilian nuclear cooperation agreement ended India’s atomic isolation following its 1974 nuclear test and could mean billions of dollars in business for U.S. firms.

Opening up the nuclear sector will facilitate the building of nuclear plants and reduce energy deficits in a country where lack of adequate power has been a drag on economic growth.

The CSC would establish a global legal regime for the compensation of victims in case of a nuclear accident. Fourteen countries, including the United States, have so far signed it.

It also includes provisions on a nuclear operator´s financial liability and requires that operators maintain insurance or other financial security measures. (Reporting by Fredrik Dahl in Vienna and by Krittivas Mukherjee and C.J. Kuncheria in New Delhi; editing by Andrew Roche)