India moves on U.S. nuclear deal with new law

NEW DELHI (Reuters) - India’s parliament will debate over the next month a new law to limit nuclear firms’ liability in the case of industrial accidents, a move crucial for U.S. firms to tap into India’s estimated $150 billion nuclear market.

Though the bill faces some political obstacles, particularly from the communists, Indian officials and analysts say it will be endorsed because the government had approached the top opposition party and been assured of its support.

“The political managers of the government have reached out to the opposition and discussed the importance of this bill,

especially in the context of a possible visit by (U.S.) President (Barack) Obama to India this summer,” said Robinder Sachdev, president of Imagindia Institute, a New Delhi-based independent think tank.

India’s government has offered to tender construction of two nuclear power plants, a business opportunity worth $10 billion, to U.S.-based firms such as General Electric Co and Westinghouse Electric Co, a subsidiary of Japan’s Toshiba Corp.

But the liability issue has delayed things, putting U.S. firms at a competitive disadvantage over Russian and French companies whose accident liability is underwritten by their governments. The Russian and French have already been awarded contracts.

The 2008 U.S. deal ended the nuclear isolation India had experienced since its 1974 atomic test and gave it access to U.S. technology and fuel, while also opening up the global nuclear market to India.

Two Indian ministers said permission had been sought from the speaker of parliament’s lower house to introduce the nuclear bill in the budget session now underway, which runs through May 7.

“The bill will be ratified I think,” a minister who asked to remain anonymous told Reuters.

While the government has a majority in the powerful lower house, it needs the support of the opposition Hindu-nationalist Bharatiya Janata Party (BJP) to ratify the bill in the upper. The bill has been cleared by the cabinet.

Other smaller procedural hurdles remain, such as New Delhi and Washington agreeing a fuel reprocessing pact, after which India will have to sign up to a global convention on nuclear liability.

The issue is sensitive in a country where a gas leak in a Union Carbide factory killed about 3,800 people in 1984, one of the world’s worst industrial disasters.

The bill will cap the accident liability of foreign contractors and supplier companies, including those from the United States. The liability of a nuclear reactor operator is likely to be pegged at about $650 million.

India’s nuclear sector is state controlled.

The South Asian nation, which relies on imported oil for some 70 percent of its energy needs, says the U.S. nuclear supply pact will help feed energy demands in its expanding economy, while helping combat global warming linked to fossil fuel emissions.

It could also help double nuclear power’s share in India’s electricity grid to 5-7 percent in the next two decades.

Additional reporting by Nigam Prusty; Editing by Alistair Scrutton and Jerry Norton