India-U.S. civil nuclear pact likely to miss June deadline

Bankruptcy of reactor maker Westinghouse clouds operationalisation of the deal.

March 27, 2017 12:15 am | Updated 12:34 pm IST

Early this month, the U.S., in a joint statement, recognised India as a ‘Major Defence Partner.’ This June 7, 2016 photo shows Prime Minister Narendra Modi greeting U.S. President Barack Obama at a meeting in the White House.

Early this month, the U.S., in a joint statement, recognised India as a ‘Major Defence Partner.’ This June 7, 2016 photo shows Prime Minister Narendra Modi greeting U.S. President Barack Obama at a meeting in the White House.

More than two years after India and the U.S. announced that the civil nuclear deal was “done,” its actual operationalisation is in doubt over a number of developments that stretch from a “school scandal” in the Japanese parliament to the Cranberry, Pennsylvania headquarters of Westinghouse Electric, which is expected to file for bankruptcy this week.

Six reactors for A.P.

According to the agreement over liability issues and the negotiations that followed former U.S. President Barack Obama’s visit to India in January 2015 and Prime Minister Narendra Modi’s visit to Washington in June 2016, the two sides had agreed to “work toward finalising the contractual arrangements by June 2017” for six reactors to be built in Andhra Pradesh by Toshiba-owned Westinghouse and the Nuclear Power Corporation of India Ltd (NPCIL).

When completed, this was to be the first operationalisation of the India-U.S. civil nuclear deal, which was announced in 2008, and proof that both sides had effectively sorted out all their issues, including over the liability that suppliers must accept in the event of an accident.

However, recent developments have led to uncertainty over the June 2017 timeline. An MEA official told The Hindu , “We are monitoring all developments. We are engaged with all parties. Our intent is to stick to the deadline, for which competitive financing arrangements need to be in place. It must be emphasised that the outlook of global industry on cooperation in India’s civil nuclear programme remains positive.”

The reason for the concern is that the nuclear arrangement hinged on two major factors — the completion of the India-Japan Nuclear Cooperation Agreement (NCA), as Toshiba and other suppliers for reactor parts are bound by Japanese laws and by the actual contract to be negotiated by the U.S.-based Westinghouse.


While the NCA was signed in Tokyo in November 2016, it is yet to be ratified by Diet (Japanese Parliament). Japanese officials told The Hindu that the NCA was expected to have been ratified in early March during the current session, but has been derailed by a controversy over accusations that Prime Minister Shinzo Abe, his wife and the Defence Minister Tomomi Inada favoured an alleged “sweetheart deal” for a school in Osaka. With lawmakers stopping all other business to discuss the issue, Mr. Abe’s stock in opinion polls and the Nikkei index have registered sharp drops in the past weeks. “Even once the India NCA is tabled, we expect to see some opposition in Parliament, as this is the first such agreement with a country that has not signed the Non-Proliferation Treaty,” said an official.

He however, noted that Mr. Abe’s party had the necessary strength to have the agreement passed eventually, and added that he was “hopeful” it would be done by the end of the session in June, just ahead of the Westinghouse-NPCIL contract agreement deadline.

While the suspense over the NCA plays out in the east, in the west the questions are growing over the impact of a possible bankruptcy filing under ‘Chapter 11’ U.S. laws by Westinghouse over massive $6.3 billion losses the company incurred last year, largely due to cost over-runs. The decision is expected to be announced this week by March 31.

In February, Westinghouse CEO Jose Gutierrez, who visited India, said in an interview to the Nikkei Asian Review , that the “Government of India and the utility [NPCIL] are committed to continue working with Westinghouse on this opportunity [for six reactors in Andhra Pradesh]. We expect that sometime this year — calendar year — we could materialise that opportunity.” However, in the same interview Mr. Gutierrez said that filing for bankruptcy was “not on the table”, which has now become a reality.

When contacted, the U.S. Embassy declined to comment on how the bankruptcy issues would affect the deal. Nuclear officials said it was “likely” the June 2017 commercial contract with Westinghouse would be “delayed”, given that other financial companies, insurance companies would require clarity on the company’s future before agreeing to sign on the contract.

“The truth is the picture is very hazy at the moment,” a senior official of NPCIL said, adding that in the absence of land acquisition procedures for the other India-U.S. nuclear venture with GE-Hitachi for six 1594 MW reactors, the future of the India-U.S. nuclear deal is, for the moment, pinned to the future of Westinghouse itself.

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