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Home > News > Columnists > Robinder Sachdev

The ABC of India's nuclear economics

May 31, 2007

It is clear we are having difficulty defining the contours of the United States-India civil nuclear cooperation, although there is still cautious optimism that things will work out.

What is not understood, though, is that the current impasse is a result of economic factors, not political ones.

In coming up with strategies to break the impasse, many people in government and outside it are, unfortunately, seeking a political solution, assuming that a bold stroke at the highest political level will cut through what they see as a Gordian knot.

The problem is they do not consider the fact that while the underlying economic will in the US is no doubt all for the nuclear deal, the same cannot be said of India.

In that country, as in the US, the political will is subservient to the economic will, and the foot-dragging that we see from the Indian political establishment is a result of the underlying economics of India's nuclear policies ever since Independence. And unless this is recognised, negotiators and well-wishers in both countries cannot address the right issues and will expend all their energies and goodwill on the wrong ones.

Clearly, they are already on the wrong road, with US lawmakers and officials repeatedly asserting they want a political breakthrough that can resolve the issues in this, the last leg of negotiations.

Even the corporate lobbyists and members of the public, who might have been expected to have a deeper understanding of the ground situation in India, have concluded it is now up to India to clear the bottlenecks, if need be using pressure from the highest political offices. This is an erroneous view and can have very negative consequences.

The current stalemate occurred because some clauses in the proposed deal have run up against established Indian plans about the economics of the civil nuclear programme.

The most important factor in the established economic Indian canon -- a framework developed over 50 years -- is that of re-processing. These are the points we need to know about this factor: Thorium is a relatively cheap source of nuclear energy. Although the technology is still underdeveloped, India is a world leader in exploiting this technology.

To generate nuclear energy from thorium, the thorium cycle needs as its input one byproduct from the uranium cycle. That is, energy is first generated from uranium, then a byproduct of that process is fed into the thorium cycle, which then releases more energy.

India has the world's second-largest reserves of thorium, over 30 percent, but just about 0.7 percent of the world's uranium. It is certainly better economics to exploit energy from an abundant and cheap resource, like thorium, than one that has to imported and is more expensive to boot (uranium).

But then, even a nuclear plant based on thorium needs a uranium cycle to precede it, because the thorium cycle needs the byproduct of the uranium cycle mentioned earlier. India needs just enough uranium to produce the byproduct in the uranium cycle so that it can run its thorium cycle to generate energy.

Thus, pure economics dictates India should use a minimal number of reactors powered by uranium to ensure it can run its many thorium reactors. Therein lies the rub. So, who should take the initiative to clear this impasse?

If an interpretation of the Hyde Act of 2006 places a blanket ban on India re-processing imported uranium -- not to produce bomb material but to feed thorium reactors -- then India's nuclear economics stand to lose. This is where the 123 logjam is located. Clearly, the ball lies in everyone's court.

The challenge for the technocrats in India's nuclear establishment is how to reconcile the different economic viewpoints with what is on offer, while also coming up with a credible roadmap to ensure the generation of the targeted levels of energy from nuclear resources.

The dilemma for the Indian leadership is to stand by what Prime Minister Manmohan Singh said in a speech in Parliament on August 17, 2006, in which he assured his detractors that India's national interest would be priority while inking the 123 deal. The political will cannot go against the economic determinism of the technocrats.

The constraints for the US administration are laid out in the Hyde Act -- and the executive cannot stretch things beyond a point. Yet, maybe the most creative solution can come from them since they are best placed to understand the constraints and deal-making possibilities this path-shattering deal can open up.

The nuclear deal negotiations has opened up possibilities for US-India relations and the global political economy, which will have repercussions well into the foreseeable future. US lawmakers face the daunting task of reconciling these possibilities with their own political, ideological, and economic views.

Besides readying the champagne bottles, corporate and public lobbyists for the nuclear deal need to spend quality time understanding India's nuclear economics, and then to build a consensus in both countries. The job is nowhere done, and much work needs to be put in to ensure it is.

There are a few simple steps in solving this problem. If we work on the economical aspect, the political one will work out by itself. All parties should focus and fully analyse India's nuclear economics.

Second, the stakeholders should not worry where the ball is, and take collective responsibility.

Third, all parties need to proactively support government interlocutors and help them with facts and any inputs that could help ease the process.

All the parties involved need to introspect, juggle their techno-economic and strategic frameworks, and then engage in a dialogue within their governments, lawmakers, and constituencies. They all have to realise that no one can afford to side-step the economics of civil nuclear energy typical to India.

This area has been neglected since July 18, 2005, when President George W Bush and Dr Singh lay the groundwork for the deal. Such neglect, if persisted with, can come home to roost.

Clearly, the Indian establishment itself cannot come up with a solution that goes beyond what was outlined in Prime Minister Singh's August 17, 2006 speech.

Given the frustration setting in, do we give one last chance to economics or do we bet on politics? I would go with economics.

Robinder Sachdev is a co-founder and director of the US India Political Action Committee, and president of the Imagindia Institute. The views expressed are personal.

First published in India Abroad

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