US-India Energy Security Partnership

India and the United States are strengthening their Energy Security Partnership. This collaboration aims to position the US as a leading supplier of oil and gas to India. Both nations view this pact as a way to address trade deficits. A aspect of this partnership involves the US-India 123 Civil Nuclear Agreement. This agreement puts stress on their commitment to nuclear energy cooperation and plans for constructing American-designed nuclear reactors in India.

Legislative Changes Required

The Government of India has announced plans to amend the Atomic Energy Act of 1962 and the Civil Liability for Nuclear Damage Act of 2010. These amendments are necessary to facilitate the collaboration between Indian and US industries in nuclear reactor production. The US seeks legislative assurances from India to ease nuclear liability provisions. The current political landscape in India poses challenges for passing these amendments in Parliament.

The 810 Authorisation Challenge

• India faces hurdle with the ‘810’ authorisation under the US Atomic Energy Act.
• This provision restricts US companies from manufacturing nuclear equipment outside the US. India aims to obtain an exemption to allow for the local manufacturing of Small Modular Reactors (SMRs).
• The 123 Agreement intended to encourage civil nuclear cooperation, but the 810 provision complicates India’s ambitions in the SMR sector.

Proposed Amendments to Indian Laws

The proposed changes to the Atomic Energy Act will allow private sector participation in nuclear operations. Currently, only state-owned entities can operate nuclear power plants. The Civil Liability for Nuclear Damage Act aims to provide compensation mechanisms for nuclear accidents. Foreign companies have cited this law as a barrier to investment in India’s nuclear sector.

Importance of Small Modular Reactors

Small Modular Reactors are vital for India’s future energy strategy. They range from 30 to 300 MWe in capacity and are seen as a commercially viable option for nuclear energy. India aims to lead in SMR technology as part of its clean energy transition. Several international companies are developing their own SMRs, denoting the global interest in this technology.

Bilateral Trade Agreement Prospects

India and the US are also negotiating a Bilateral Trade Agreement (BTA). This agreement aims to double bilateral trade from $200 billion to $500 billion by 2030. The BTA focuses on specific goods rather than overall trade liberalisation. India is expected to lower tariffs to facilitate greater access for American products, while the US aims to address its trade deficit with India.

Current Trade Dynamics

India’s trade surplus with the US has increased in recent years. In 2023-24, India’s exports to the US reached $77.52 billion, while imports totalled $42.19 billion. Key exports include engineering goods and electronic products. The US exports primarily consist of mineral fuels and nuclear reactors. The growing energy trade is expected to further reduce the trade deficit.

Future Collaboration Opportunities

India’s Department of Atomic Energy is exploring partnerships with companies like Holtec International for SMR development. The US administration is likely to progress on the authorisation necessary for these collaborations. This could potentially unlock the commercial benefits of the Indo-US civil nuclear deal established nearly two decades ago.

Questions for UPSC:

1. Discuss the implications of the US-India Energy Security Partnership on global energy dynamics.
2. Critically examine the challenges faced by India in amending the Atomic Energy Act of 1962.
3. Explain the significance of Small Modular Reactors in India’s energy strategy.
4. Comment on the potential impact of a Bilateral Trade Agreement on India’s economic landscape.

Answer Hints:

1. Discuss the implications of the US-India Energy Security Partnership on global energy dynamics.

1. Enhances US position as a major oil and gas supplier, altering traditional energy trade routes.
2. Promotes energy diversification for India, reducing dependence on any single supplier.
3. Encourages investment in renewable energy and nuclear power, aligning with global sustainability goals.
4. Strengthens geopolitical ties, potentially influencing energy policies of other nations.
5. May lead to increased competition among energy suppliers in the Asian market.

2. Critically examine the challenges faced by India in amending the Atomic Energy Act of 1962.

1. Political resistance due to reduced numbers of the NDA government in Parliament, complicating passage.
2. Concerns over civil liability provisions deterring foreign investment in nuclear projects.
3. Balancing public safety and industry interests amidst calls for private sector participation.
4. Need for consensus among various stakeholders, including state-owned enterprises and private players.
5. Legislative complexity and historical precedents of slow reforms in the nuclear sector.

3. Explain the significance of Small Modular Reactors in India’s energy strategy.

1. SMRs offer flexible and scalable energy solutions, suitable for diverse energy needs.
2. Support India’s clean energy transition goals by providing low-carbon nuclear options.
3. Facilitate local manufacturing and technology transfer, boosting domestic capabilities.
4. Position India as a leader in emerging nuclear technologies on a global scale.
5. Address energy security by diversifying energy sources and enhancing grid reliability.

4. Comment on the potential impact of a Bilateral Trade Agreement on India’s economic landscape.

1. Could lead to increased market access for Indian goods in the US, boosting exports.
2. May require India to lower tariffs, impacting domestic industries and political sentiments.
3. Strengthens economic ties, encouraging collaboration in technology and investment sectors.
4. Addresses trade imbalances, potentially reducing the trade deficit with the US.
5. Encourages reforms in trade policies, enhancing India’s competitiveness in global markets.