Why the India-US 123 Agreement of 2007 could finally achieve its full potential

Far more strategic is an announcement that signals their commitment to “fully realise” the US-India 123 Civil Nuclear Agreement, alongside a pledge to move forward on plans to work together to build American-designed nuclear reactors in India through large scale localisation and possible technology transfer.

Legislative hurdles on road ahead

The two sides took note of the announcement by the Indian Government in the Union Budget to take up amendments to the Atomic Energy Act, 1962 and the Civil Liability for Nuclear Damage Act, 2010 (CLNDA) for nuclear reactors.

It was also decided “to establish bilateral arrangements in accordance with CLNDA”, which would address the issue of civil liability and facilitate the collaboration of Indian and US industry in the production and deployment of nuclear reactors.

It is learnt that Washington wanted to secure a commitment on bringing a law in India’s Parliament to ease the nuclear liability provision, but New Delhi was initially willing to offer only an assurance.

The concern on the American side is that the NDA government’s reduced numbers in Parliament could make it difficult to get the amendments on the liability law passed.

The statement issued by the Ministry of External Affairs (MEA) on Thursday reiterated the commitment to take up amendments to both laws. The “path forward will unlock plans to build large US-designed reactors and enable collaboration to develop, deploy and scale up nuclear power generation with advanced small modular reactors”, it said.

In the US, the ‘810’ roadblock

While New Delhi has onerous legislative commitments to set this partnership rolling as envisaged in the 123 Agreement of July 2007, it has sought a major commitment from Washington as well.

India is seeking an exemption to one of the most restrictive of American legislative provisions — the ‘810’ authorisation that explicitly restricts US companies from manufacturing any nuclear equipment or performing any nuclear design work outside of the US.

The 123 Agreement aimed to enable full civil nuclear energy cooperation between India and the US by providing for “full civil nuclear energy cooperation covering nuclear reactors and aspects of the associated nuclear fuel cycle including enrichment and reprocessing”.

This ‘810’ provision — Part 810 of Title 10, Code of Federal Regulations of the US Atomic Energy Act of 1954 — allows American nuclear power companies to export to countries such as India under some strict safeguards, but restricts them from manufacturing any nuclear equipment or performing any nuclear design work outside of the US.

This authorisation is essentially a non-starter for New Delhi’s Small Modular Reactors (SMR) ambitions, since it wants to participate in manufacturing these reactors being built in India, and to co-produce the nuclear components for its domestic needs.

An exception on 810 is, therefore, vital for India.

Amendments to India’s laws

1962 ACT: The proposed changes to the Atomic Energy Act are aimed at opening the door wider to let the private sector into nuclear power plant operations, and to enable them to enter the SMR sector as operators. This is currently allowed only to state-owned Nuclear Power Corporation of India Ltd (NPCIL), and some joint ventures between NPCIL and other state-owned companies such as NTPC Ltd and NALCO.

2010 ACT: The original Civil Liability for Nuclear Damage Act, had sought to create a mechanism to compensate victims for a possible nuclear accident, and allocate liability and specify procedures for compensation.

These provisions have been cited as an impediment by foreign players such as GE-Hitachi, Westinghouse, and the French nuclear company Areva (Framatome) to investing in India, primarily on the grounds that the legislation channelised operators’ liability to equipment suppliers.

Foreign vendors have flagged this as a disincentive to invest in India’s nuclear sector amid apprehensions of incurring future liability.

Hope for partnership for SMRs

On the SMR deal, India’s Department of Atomic Energy (DAE) is learnt to be in exploratory talks for collaborations with the Camden, New Jersey-based Holtec International, a private company that is now billed to be one of the world’s largest exporters of capital nuclear components.

The 810 authorisation is vital for this to go forward. The Biden administration is learnt to have initiated work on an authorisation to Holtec towards the end of its tenure, but progress was limited by the lack of time.

There are indications that this will be taken forward by the new administration, potentially opening the doors for leveraging the commercial potential of the Indo-US civil nuclear deal almost two decades after it was concluded.

Why SMRs matter to India

SMRs — reactors with a capacity of 30MWe (megawatt electric) to 300 MWe per unit — are increasingly seen as important for nuclear energy to remain a commercially competitive option in the future.

India is pushing for a leadership position in this small reactor space, both as a way of fulfilling its commitment to clean energy transition, and of bundling SMRs as a technology-led foreign policy pitch.

Currently, two SMR projects have reached the operational stage globally. The Akademik Lomonosov floating power unit in Russia, which has two modules of 35 MWe, started commercial operation in May 2020. The other, a demonstration SMR project called HTR-PM in China that was grid-connected in December 2021, is reported to have started commercial operations in December 2023.

Multiple Western companies are in various stages of getting certifications for their own SMRs, including Holtec International’s SMR-300, the Rolls-Royce SMR, NuScale’s VOYGR SMR, Westinghouse Electric’s AP300 SMR, and GE-Hitachi’s BWRX-300.