After govt vote, India nuke deal to clear next hurdle

NEW DELHI - India's atomic energy deal with the United States, now back on track after the government won a confidence vote, next faces objections from some countries over selling uranium fuel and technology to the nuclear power.

By (Reuters)

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Published: Wed 23 Jul 2008, 6:49 PM

Last updated: Sun 5 Apr 2015, 12:56 PM

But analysts say the landmark agreement, worth at least $40 billion for the energy business in a drive to double India's share of nuclear power to around 5-7 percent by 2030, should pass international muster thanks to staunch U.S. support.

The pact, which would make India a de facto nuclear power despite not signing the Non-Proliferation Treaty and conducting nuclear tests in 1974 and 1998, ran into trouble after Indian Prime Minister Manmohan Singh's government faced a revolt by its former communist allies, culminating in Tuesday's vote.

With that battle won, analysts say India and the United States look well placed to muster support from the International Atomic Energy Agency and the Nuclear Suppliers Group (NSG), the next steps needed before it goes to U.S. Congress for approval.

"There will be obstacles and some countries are sceptical about the deal, but in the end it should get approved," said Siddharth Varadarajan, diplomatic editor of The Hindu newspaper. "The commercial interests are just too compelling."

While the communists opposed the pact on the argument that it would make India a pawn of Washington, for other critics it gives India, a nuclear outlaw for decades after it developed nuclear weapons, too many rewards for little in return.

The deal will enable around 400 Indian companies to tie up with major global nuclear firms such as GE, Westinghouse and Areva to develop India's civilian nuclear power, while requiring it to accept international monitors for its facilities.

But India still says the pact will allow it to carry out its own nuclear tests. India would still have the right to build a strategic nuclear fuel reserve, meaning it could better resist a halt of international supplies after a nuclear test.

"It's excellent from an energy perspective, and from a national perspective we've managed to extract concessions without giving anything away," said Shankar Sharma, vice-chairman and joint managing director at First Global Securities in Mumbai.

Those proliferation worries may see objections from such NSG members as Canada, Ireland and New Zealand. Some countries may attempt to insert conditions like banning nuclear tests.

Although that would probably be a deal stopper for India, American pressure will probably prevail in the NSG.

The deal could run out of time to be passed by the U.S. Congress under the Bush administration.

But many analysts believe Washington will fast track the pact, fearful other countries may soon fill the gap.

"Once the NSG gives it approval, the way is open for countries like France and Russia to deal with India," said Varadarajan. "Washington knows this."

Looking at china

Indian policymakers often look at competitors like China, whose nuclear power programme is moving even faster than official targets, and in a decade will be more than enough to power Spain.

In contrast, India's 17 nuclear power plants, capable of producing about 4,000 megawatts, are running at 55 percent of capacity because of fuel shortages.

The deal would double India's nuclear power contribution to around 5-7 percent of its total power supplies over the next quarter of a century, although pollution-spewing coal and oil will still contribute around three-quarters of its energy needs.

"It seems small but we're talking of 60,000 to 70,000 megawatts," said Leena Srivastava, executive director at The Energy and Resources Institute.

That is equivalent to about half of India's current power capacity, which the government estimates will need to grow by as much as 10 percent each year.

"It's going to be a huge quantum jump."

But that won't come soon enough to ease a shortfall of up to 17 percent of its total energy needs at a time when soaring coal, gas and oil prices are straining a nation that imports about 70 percent of the oil it consumes.

Indian firms, particularly those in construction and the energy equipment sector like Larsen and Toubro, Bharat Heavy Electricals and India's biggest power producer NTPC Ltd, among others, could gain.

All these shares all rose on news of the deal.

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