The Indo-US nuclear deal has set off a chain reaction that has triggered an explosive month of posturing and haggling in Indian politics, with the left parties, allies of the United Progressive Alliance (UPA) government, raising the bar on scuttling the deal by hanging a Damocles’ Sword (the threat of withdrawal of support) over the Congress party, and the opposition NDA terming the deal “unequal.”
What both, the left parties and the opposition National Democratic Alliance (NDA) parties led by the BJP are united on is that the deal would effectively hobble India’s nuclear program, while the country would have no assurance of uninterrupted fuel supplies for its civilian nuclear reactors.
The Hyde Act, which provides the legal basis for a 123 Agreement with India, has two sides to it. Both in turn give off a third dimension that is emerging in the growing US tilt toward India. The heavy lobbying — both for and against — in the US and India on the deal and the personal push of both American President George W. Bush and Indian Premier Manmohan Singh speak of a new thrust and trust between the two nations.
It is this change in direction and the need for power that has prompted India to go for the deal. As its economy grows at a fast clip, India needs to rethink its power needs — especially with the growing clamor for clean source of energy to beat climate change.
Power generation, according to experts, today is 15 to 20 percent below the requirements. And this is felt by the public in the perpetual power shortage and outages. As India grows, so will this gap. This gap between energy demand and supply could well slow down the economy.
If the government hopes to keep the projected eight percent growth over the next quarter of century, then, experts say, India will need to at least triple its primary energy supply and quintuple its electrical capacity. This will force India, which already imports a majority of its oil, to look beyond its borders for energy resources.
Without a coherent energy policy, and with competing ministries and departments slowing down efforts to set up an effective energy policy the government would not be able to sustain this growth.
A self-sufficient India has been relying on its thermal power for its energy needs. Though coal accounts for more than half of the country’s energy consumption, the poor quality of Indian coal, coupled with a lack of infrastructure to clean it, poses a major environmental threat.
India’s foreign dependency for oil and natural gas and inefficient electric systems with unreliable power grids causing regular blackouts, spell a future of energy crunch rather than the fuel that can drive the Indian economy on its sustained path.
Unless uninterrupted supply of gas comes to India very cheap or nuclear power plants are built in quick succession, India could well be the victim of the drag-down effect. Especially since the proposed hydroelectric projects have run into problems, with social and political issues preventing quick implementation.
The flip side to the argument for nuclear energy is that experts say that it forms only three percent of India’s total commercial energy mix. They also emphasize that no clear assessment has been made available whether the cost of nuclear energy generated from imported fuel, equipment and technology would be economically viable.
Nor has there been any detailed study on whether India would gain more with the same level of investment to renewable sources of energy like hydropower, wind and solar energy. The detractors also question the fact of foreign dependency. They ask, what would happen to the enormous investments in nuclear power plants and by the end-users of the anticipated power supplies from nuclear reactors if for any reason the US halts nuclear cooperation with India?
They cite the case of India’s experience with fuel for Tarapore as an example when the US halted fuel following India’s explosion of the peaceful nuclear experiment in May 1974. The TAPS-1 and 2 light water reactors (LWRs), built by General Electric of the United States and designed by Bechtel, use LEU (low-enriched Uranium) as fuel and under a 1963 agreement, US were to supply fuel for 30 years. But the US, citing the Nuclear Nonproliferation Act of 1978, denied fuel to the two units.
There are, however, very few choices before India. And nuclear energy has to provide a significant component of India’s power needs. And in this the India-US deal could prove significant. It could also translate into economics, commerce, trade, development and FDI (foreign direct investment).
If India sets up 10 large size nuclear power plants, which is its intent in next 15 years, India will import technology and hardware from US for at least half of these projects. The projected cost of each of these plants at a greenfield site is about $4 billion.
Just add up the numbers, with the major beneficiaries being US companies. India will then have to generate funds for these installations either in the form of FDI or soft and commercial loans. The US lenders and US suppliers will be the ones to benefit. Further expansion of business dealings on both sides will follow.
The deal could also spin off cooperation in various sectors and industry, especially now that the US is looking for a low-cost supplier that could be alternative to China. India too will gain from the deal, especially when it provides an implicit recognition as a nuclear power.
Also, apart from the gain in an alternative source of power, India would get the money for its most urgent needs — building its infrastructure and manufacturing base. This along with deals in various growing sectors in India could take the nation into the big league.
Also within the next decade India will have a skilled work force as the transfer of technology and knowledge ensues between the partners. The US too would gain as the labor costs in India will always be cheaper than the costs in the US and Europe, making India an ideal candidate for this technology transfer.
The latest technology for nuclear power generation will be the major benefit from the deal. Most of Indian nuclear power plants are of other country’s design. And India would need to continue this practice. The reason is that the technology already exists and has proven to be safe, and also a homegrown technology will trigger the need to import critical components — sending India back to the same players.
But the most promising part of the deal is that India will have a new sense of power in the trillion-dollar club. Also when electricity supply situation in India’s households, industry and farms is significantly better, everyone will have to thank the deal for the power that pushed India into the zone, especially since India would not be stuck with a one-sided Iran-Pakistan-India gas pipeline deal. This would have held India permanently hostage to Pakistan.
Unfortunately, the divide over the nuclear deal has destroyed the traditional national consensus on India’s foreign policy. It is here that the UPA has failed to carry the day. With nobody having any clear idea what the deal entails, public frenzy is being whipped up by blithe statements and partisan politics.
That the US too is pushing for the deal is largely due to the fact that India has a growing economic and political role in the world. There is also talk of India as an “ally” or at least a “strategic partner” of the US, who could benefit with India ensuring safety of sea-lanes of the Indian Ocean.
The US tilt toward India could also be driven by the assessment that India could be a counter weight to a “rising China” in the region. The recent naval war games that saw India, US, Japan, Australia and Singapore in action in the Bay of Bengal give credence to this reasoning.
Also Japanese Premier Shinzo Abe, in his recent visit to India, called for the creation of an “arc of freedom and prosperity” bringing together Japan, India, US and Australia — a statement that aimed to counter China’s rising influence.
In this backdrop, the Indian government needs to make an honest judgment whether the deal can be done on terms acceptable to India. It needs to be done if their energy needs are to be addressed amid all this power play.
