STOCK MARKET BSE NSE

Obama's Nuclear Gift to Modi is Shrewd Investment

Published: 26th January 2015 12:23 PM  |   Last Updated: 26th January 2015 12:23 PM   |  A+A-

PTI1_25_2015_000306A

SINGAPORE - Barack Obama's nuclear gift to India looks like a shrewd investment. By agreeing to a workaround that protects power station builders from civil liabilities in the event of a meltdown, the U.S. president has effectively unblocked New Delhi's reactor programme. The bigger bet is on ending India's energy crisis.

The agreement, struck on the first day of Obama's visit to Indian Prime Minister Narendra Modi, could bring new orders for equipment makers like GE-Hitachi , Toshiba's Westinghouse and France's Areva. About 4 gigawatts (GW) of new nuclear power capacity is under construction in India; another 40GW is planned over the next 10 years. Even if only half of it gets built, that's worth $35 billion in contracts.

But a more potent opportunity for U.S. businesses may be the jolt to Prime Minister Narendra Modi's "Make in India" campaign. Lack of power is the single biggest obstacle to making India a manufacturing force. Electricity supply in northern parts of the country, which are poor and bursting with surplus labour, fell 6 percent short of demand in December.

Mining more coal will remain Modi's first priority. But nuclear power will play an important supporting role. Currently it accounts for just 3 percent of India's total electricity consumption; a legacy of the country's pariah status in the global market for fissionable materials. That ended in 2008 with a civilian nuclear agreement with the United States. But the reactors that were conceived got stuck after India passed a law in 2010 making global equipment makers liable for accidents.

Obama has cut Modi some slack by agreeing to a compromise whereby state-run Indian insurers share the liability. Though it's unclear how much they will charge for that insurance, this looks like a transfer of risk from manufacturers to Indian taxpayers. The President also dropped the U.S. demand that it retain the right to inspect Indian facilities that are under international safeguards.

Doubling India's 5GW of nuclear power capacity could make low-cost manufacturing in India a viable option before Modi is due for re-election in 2019. By backing a man who until last year wasn't welcome in the United States, Obama is betting big on the India opportunity.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp