The government has refuted reports that it is hunting for a route to get around a crucial law that makes foreign suppliers liable for a nuclear disaster. The Prime Minister is meeting US President Barack Obama next month in New York. The US has been pressuring India to grant its companies greater protection from liabilities.
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NDTV was the first to report that the government is considering lowering the liability for foreign suppliers of nuclear reactors ahead of the PM's trip to the US.
The issue is central to a deal with the US firm Westinghouse Electric Company which was contracted last year to supply reactors to a new nuclear plant in Gujarat. The Cabinet Committee on Security (CCS) is meeting on Tuesday to discuss the deal.
The US says that it has seen no real commercial benefits from the nuclear agreement it signed with India in 2008. It reversed a 34-year-old US ban on supplying nuclear fuel and technology to India. In exchange, the US hopes to enter India's market for nuclear equipment, worth $175 billion, according to firms like General Electric and Westinghouse.
In 2010, Parliament passed the Civil Liability for Nuclear Damage Act, which creates a liability cap of 1,500 crores for nuclear plant operators for economic damage in the event of an accident.
In India, the state-run Nuclear Power Corporation of India operates all nuclear plants. It can, in turn, seek compensation of a maximum of 1500 crores from foreign suppliers if their reactors caused the disaster.
Critics and activists have challenged this in the Supreme Court. They say that nuclear operators and suppliers should be jointly and absolutely liable for civil damages in the event of an accident, and that their financial liability must be unlimited.
Foreign Affairs Minister Salman Khurshid has said that the law will not be violated, and that the government will look for a "win-win" situation for both sides.
Attorney General GE Vahanvati has advised the government that it is upto the Nuclear Power Corporation of India to decide whether to include or enforce liability in its contract with a foreign supplier. Senior ministers said his opinion was sought in response to clarifications from Russian and French suppliers.
If a foreign supplier's liability is limited, the Indian tax payer will have to pay in case of a nuclear accident like Fukushima in Japan, Russia's Chernobyl disaster or the Three-Mile Island accident in the US.
The government has already been accused of bending over backwards to accommodate foreign investors, as a result of the circumstances of the Indo-US nuclear deal. Even the Indo-US nuclear deal was cleared through Parliament narrowly in 2008, with Dr Singh's government almost falling in a confidence vote over the issue.
