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FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5178
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 7337
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RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC
RUEHUNV/USMISSION UNVIE VIENNA 1726
RUCNDT/USMISSION USUN NEW YORK 7546

UNCLAS SECTION 01 OF 06 NEW DELHI 000152 
 
SENSITIVE 
SIPDIS 
 
NUCLEAR REGULATORY COMMISSION, DEPARTMENT OF ENERGY FOR 
RBOUDREAU, MGILLESPIE, TCUTLER 
 
E.O. 12958: N/A 
TAGS: PREL PARM TSPL KNNP ETTC ENRG TRGY IN
SUBJECT: CIVIL NUCLEAR TRADE MISSION REVEALS IMPLEMENTATION 
CHALLENGES 
 
REF: A. NEW DELHI 141 
     ¶B. NEW DELHI 29 
     ¶C. 08 NEW DELHI 2985 
 
¶1. (SBU) This is an action request; please see paragraph 8. 
 
¶2. (SBU) SUMMARY.  A trade mission co-led by the U.S.-India 
Business Council (USIBC) and Nuclear Energy Institute 
explored opportunities for civil nuclear cooperation in 
meetings with senior political and technical officials in New 
Delhi January 11-14 and Mumbai January 14-16, highlighting 
several critical implementation issues.  India will sign its 
Safeguards Agreement with the International Atomic Energy 
Agency, but senior officials remained vague on when this will 
take place and how they plan to fill in the Agreement's blank 
declaration of separated facilities annex.  India is ready 
"right away" to begin negotiating the reprocessing 
arrangement envisioned in Section 6(3) of the 123 Agreement, 
and suggested that its conclusion was a prerequisite to 
sealing commercial deals.  Designating a counterpart to 
India's negotiator and signaling willingness to begin this 
negotiation could prevent delays harmful to the commercial 
prospects of U.S. firms.  Indian officials affirmed their 
intention to ratify the Convention on Supplementary 
Compensation for Nuclear Damage (CSC) and agreed that it 
would most likely take place in the next Parliament after 
India's general elections, due by April.  They shared that 
the politically complex process of reactor park site 
selection was underway, but that no further announcements 
were expected prior to the elections.  Several senior 
officials reaffirmed India's commitment in its letter of 
intent to set aside at least two reactor park sites and to 
purchase reactors with at least 10,000 Megawatts (MWe) total 
generating capacity from American firms. 
 
¶3. (SBU) SUMMARY CONTINUED.  U.S. industry representatives 
expressed anxiety over the uncertain and lengthy U.S. and 
Indian licensing requirements, which they felt put them at a 
competitive disadvantage and delayed meaningful commercial 
engagement.  They also expressed concern that Indian law does 
not provide patent protection in the nuclear industry. 
Department of Atomic Energy Chairman Anil Kakodkar's 
statement that he felt "betrayed" by United States policy 
supporting a ban on enrichment and reprocessing technology 
(ENR) in the Nuclear Suppliers Group (NSG) reminded the 
delegation that nonproliferation issues remain highly 
sensitive in the context of the emerging strategic 
partnership and will continue to require careful management 
beyond the conclusion of the 123 Agreement.  END SUMMARY. 
 
Trade Mission Probes Opportunities, Reveals Challenges 
- - - 
 
¶4. (SBU) Forty executives representing the U.S. civil nuclear 
industry visited New Delhi January 11-14 and Mumbai January 
14-16 as part of a trade mission supported by the Department 
of Commerce and co-led by the U.S.-India Business Council 
(USIBC) and the Nuclear Energy Institute.  This thematic 
report highlights several of the critical implementation 
issues raised during the delegation's visit, drawing from a 
dozen meetings with a variety of senior political and 
technical officials, including Minister of External Affairs 
Pranab Mukherjee; Minister of State in the Prime Minister's 
Office Prithviraj Chavan; Department of Atomic Energy 
Chairman Anil Kakodkar; and Planning Commission Deputy 
Chairman Montek Singh Ahluwalia (full list of meetings para 
19).  The parallel visit of a U.S. Department of Energy team 
to restart the Civil Nuclear Energy working Group (CNEWG) is 
reported ref A. 
 
 
NEW DELHI 00000152  002 OF 006 
 
 
Safeguards Agreement:  Possibly Signed Within A Month 
- - - 
 
¶5. (SBU) Indian officials agreed that the first order of 
business should be the signing of India's Safeguards 
Agreement with the International Atomic Energy Agency (IAEA), 
but they remained vague on when this would take place and how 
they would populate the Agreement's blank declaration of 
separated facilities annex.  Minister Chavan echoed prior 
statements from the Ministry of External Affairs that India 
had "made very good progress" and expected to sign "very 
shortly, even within one month's time."  Indian officials 
have not shared with Post how they plan to ensure that 
India's declaration of nuclear facilities would be consistent 
with its 2005 Separation Plan, a prerequisite to the issuance 
of the U.S. Presidential certifications necessary to permit 
the licensing of U.S. exports mandated by the U.S. Congress 
in the 123 Agreement implementing legislation. 
 
Fuel Reprocessing:  India Ready to Negotiate Arrangement 
- - - 
 
¶6. (SBU) Indian officials made clear for the first time that 
India was ready "right away" to begin negotiating the 
reprocessing arrangement in Section 6(3) of the 123 
Agreement.  Chavan emphasized that "other countries do not 
have issues with reprocessing technology" and that India 
hoped to resolve this issue "as soon as you are ready." 
Mukherjee referred to "technical issues that require 
clarification."  Kakodkar in particular suggested that India 
would not conclude commercial contracts with U.S. firms 
without first agreeing to the reprocessing arrangement.  He 
described the commercial and reprocessing negotiations as 
"interlocking" and that he hoped the negotiations could take 
place in parallel.  In order to prevent the reprocessing 
negotiation from dragging on and delaying commercial 
opportunities, Kakodkar said he had been "keen to put a 
timeline in the 123 Agreement" and he was now "ready and 
anxious to start that process right away."  (Section 6(3) 
requires that consultations on arrangements and procedures 
begin within six months of a request by either Party and be 
concluded within one year.) 
 
¶7. (SBU) Kakodkar elaborated on his red-lines for the 
reprocessing arrangement negotiation based on his conviction 
about the importance of reprocessing.  "If Uranium and 
derivatives are covered by IAEA safeguards, fine; but if you 
say we must ask permission to reprocess, that will be 
problematic," he said.  Kakodkar felt strongly that 
indefinite storage of spent fuel was "not an option in India" 
because it was "not sustainable from an energy point of view, 
in terms of credible waste management, or on security 
grounds."  Kakodkar concluded that he was "100 percent 
certain that the whole world will move to support 
reprocessing," and said he looked forward to the day when 
India and the U.S. could collaborate on reprocessing 
research.  Apart from reprocessing, Kakodkar said provision 
of a lifetime fuel stockpile would be a key component of 
reactor contracts.  These arrangements must be "robust," 
"prevent obstruction," and be "guided by 123 Agreement." 
Kakodkar also said fuel supply contracts must permit the 
manufacture of fuel in India. 
 
¶8. (SBU) ACTION REQUEST:  India's interest in commencing the 
reprocessing arrangement negotiations was muddled in the 
exchange of diplomatic notes that brought the 123 Agreement 
into force on December 6, 2008.  A second Indian diplomatic 
note dated December 6 designated Ministry of External Affairs 
Joint Secretary for External Affairs Gitesh Sarma, an 
assistant secretary-level foreign ministry official posted to 
 
NEW DELHI 00000152  003 OF 006 
 
 
the Department of Atomic Energy in Mumbai, as "the nodal 
point for the Administrative Arrangement to be established 
for the effective implementation of the provisions of the 
Agreement, pursuant to Article 17," but the note said nothing 
about the Reprocessing Arrangement described in Section 6(3). 
 Post requests that the Department designate Sarma's 
counterpart and indicate willingness to begin negotiating the 
Section 6(3) arrangements at the earliest opportunity so as 
not to delay the commercial prospects of U.S. firms. 
 
Liability Convention:  To Parliament After Elections 
- - - 
 
¶9. (SBU) Indian officials expressed their intention to ratify 
the Convention on Supplementary Compensation for Nuclear 
Damage (CSC) to provide the liability protection required by 
U.S. firms to do business in India, and seemed to agree that 
it would most likely be done in the next Parliament after 
elections due in April-May.  Adoption of the Convention 
requires an extensive inter-agency review followed by Cabinet 
and then parliamentary approval.  Mukherjee said the 
inter-ministerial consultations had been completed and he saw 
"no difficulties getting the legislation passed."  He did not 
indicate a timeline, saying only that ratification would have 
to wait for Parliament to act.  (He appeared to have 
abandoned the idea of implementing the Convention 
"administratively," as reported ref B.)  Ahluwalia was less 
familiar with the issue, but responded positively to the 
suggestion that India needed the Convention to have the 
widest possible choices among foreign vendors to meet its 
ambitious nuclear power generation goals and Indian private 
industry needed it to participate in the global civil nuclear 
market.  At Ahluwalia's request, a USIBC delegation member 
gave him a one-page brief on the Convention and its 
advantages for India.  Ahluwalia seemed keen to advocate for 
early adoption of the Convention. 
 
¶10. (SBU) Chavan and Kakodkar each said India's work toward a 
liability regime had pre-dated the July 2005 joint statement 
launching the Civil Nuclear Cooperation Initiative with the 
United States, stemming from the Indian government's 
realization that civil nuclear power would be required to 
fuel India's rapid growth and that achieving its goal of a 
three-stage Thorium cycle would be "too big for laboratory 
development" and would have to be implemented "in the 
commercial domain."  They likewise agreed that the draft 
legislation to implement the Convention was "in the advanced 
stage," according to Chavan, and "almost complete," according 
to Kakodkar.  Chavan shared that major bills usually go to 
committees first, so Parliament probably does not have 
sufficient time to enact the measure in the upcoming abridged 
February 12-26 session which is mainly aimed at passing a 
temporary budget measure (a "vote of account") to allow the 
government to function until the new Parliament convenes 
after the election.  The options of dispensing with 
committees and going straight to the floor of Parliament or 
taking direct executive action were "theoretically possible, 
but practically difficult."  Therefore, he did not expect 
Parliament to take action prior to elections that must be 
held by April.  He stressed, however, that Cabinet approval 
would constitute "a major task achieved," since a commitment 
by the Cabinet was usually not undone, even by successive 
governments. 
 
¶11. (SBU) Kakodkar stressed that he understood the importance 
of the Convention, observing, "It is clear the world is 
converging on the Supplementary Convention as the global 
liability standard."  He believed the next Parliament would 
act on the law and dismissed political concerns, saying the 
123 Agreement debate has created "a clear national consensus 
 
NEW DELHI 00000152  004 OF 006 
 
 
on nuclear power."  Kakodkar rejected suggestions that India 
might implement an intermediary measure, saying decisively, 
"Our law will be 100 percent consistent with the Convention." 
 (COMMENT:  Some NPCIL officials and Indian industry 
representatives suggested that the government may implement 
intermediary measures to address liability not fully 
consistent with the Convention, which caused some alarm among 
U.S. industry representatives, but this possibility was not 
confirmed by senior Indian officials.)  Like the reprocessing 
arrangement, Kakodkar again stressed his hope that the lack 
of the Convention would not be a "constraining factor" for 
U.S. industry in the short term and that India's work on the 
Convention should move in parallel with commercial contract 
negotiations.  (Delegation members expressed concern to the 
Indian officials that they may have difficulty engaging in 
contract negotiations without the Convention in place.) 
 
¶12. (SBU) Chavan also elaborated on other upcoming business 
before Parliament related to civil nuclear cooperation.  The 
government is planning amendments to India's Atomic Energy 
Act to grant more autonomy to the Atomic Energy Regulatory 
Board (AERB).  The government is also preparing legislation 
to permit a private sector firm to take a minority stake in 
the nuclear generation business in joint ventures with public 
companies, such as the Nuclear Power Corporation of India 
(NPCIL) and the National Thermal Power Corporation (NTPC). 
He explained that private firms, including fully-owned 
foreign firms, would not be required to enter into a joint 
venture for manufacturing or construction in the nuclear 
industry, but that this new rule would permit Indian private 
firms to take an equity stake in the power generation and 
management business. 
 
Site Selection:  Will Honor Letter of Intent 
- - - 
 
¶13. (SBU) Indian officials were clear that although 
exploratory work on new reactor sites is complete, the 
process of site selection and allocation is a politically 
complex and that no new reactor sites would be announced or 
allocated prior to the next elections.  Mukerjee gave away 
nothing, saying only that the selection process was 
"underway."  Chavan recalled that the government had 
announced Jaitapur, Maharashtra as the latest site, and that 
"shortly we will seek necessary clearances and announce new 
sites."  He added that the government was looking at multiple 
sites and he could not say whether they would be announced 
one at a time or all at once. (France is widely rumored to 
have a lock on the Jaitapur site.)  Chavan shared that 
"Everything has been done to select the sites; we are 
collecting and analyzing the information."  He revealed there 
was "intense competition among states" to host reactor park 
sites.  Kakodkar said the site selection process was a 
"technical as well as political process," and that he was 
unable to discuss it.  He concluded, "What is clear is you 
will have two sites." 
 
¶14. (SBU) Kakodkar and Chavan each reaffirmed the September 
10, 2008 letter of intent from Foreign Secretary Menon to 
Under Secretary Burns committing India to set aside at least 
two reactor park sites and to purchase reactors with at least 
10,000 MWe total generating capacity from U.S. firms.  Chavan 
said, "We stand by the letter of intent and see a major role 
for the U.S. industry in India's program."  In response to 
concern about level playing field and first-mover advantage 
of the Russians and French, Chavan replied, "We will not let 
U.S. interests suffer; the letter of intent commitment will 
be fully met."  Kakodkar said, "We have no problem honoring 
the letter of intent commitment of 10,000 MWe because our 
requirements are so large."  India had interests in "diverse 
 
NEW DELHI 00000152  005 OF 006 
 
 
technologies," according to Kakodkar, so the U.S. "need not 
be concerned that we are talking with different countries." 
Kakodkar cautioned, however, that the "only condition is that 
you must be able to generate energy at competitive rates 
because under the Indian system nuclear power must compete 
with the alternative sources on a unit cost basis." 
(Kakodkar also stressed this point to Nuclear Regulatory 
Commission Chairman Dale Klein, ref C.)  He argued that the 
"best strategy is to team up with Indian firms, which produce 
cheaper than some global competitors and can satisfy all 
requirements except the ability to make large forgings."  He 
concluded, "Without Indian partnerships, I'm pretty certain 
you will find it difficult to compete on price here." 
 
Anxieties About Licensing and Patent Protection 
- - - 
 
¶15. (SBU) During the course of the visit, U.S. firms 
expressed a variety of concerns with U.S. and Indian 
licensing requirements that they felt put them at a 
competitive disadvantage and delayed meaningful engagement 
with the Indian civil nuclear market.  Many firms felt the 
"Part 810" licensing process -- coordinated by the U.S. 
Department of Energy along with the Departments of Defense, 
State, and Commerce -- was unclear and protracted.  In 
particular, they felt the uncertainty of the licensing 
process in the Indian context and the time required to obtain 
licenses -- likely several months -- constrained firms from 
sharing meaningful technical information and commercial 
proposals with potential Indian partners.  Some Indian 
industry interlocutors privately lamented that they had 
little reason to engage U.S. firms until they received 
licenses permitting them to share information beyond what was 
already available in the public domain. 
 
¶16. (SBU) Kakodkar noted that U.S. firms also had to obtain 
Indian licenses from the Atomic Energy Regulatory Board 
(AERB).  The AERB requires firms to submit detailed proposals 
and that firms must already have received an export license 
from the country of origin -- in the case of U.S. firms, from 
the Nuclear Regulatory Commission (NRC).  Thus, the AERB 
process cannot begin until after the Part 810 process and the 
NRC licenses are issued.  According to Kakodkar, "Both the 
AERB and NRC processes are detailed and elaborate, but not 
identical.  They will take time, but the reprocessing 
negotiation will take longer, so all these processes should 
move in parallel."  (COMMENT:  In practice, Kakodkar's hope 
that these processes can move in parallel discounts his own 
sequencing stipulations and fails to recognize the 
constraints on U.S. firms:  that they cannot engage in 
meaningful commercial discussions until the licenses are 
issued or make binding commercial decisions until the 
liability convention is in place, and that servicing the 
Indian industry requires new captial investment with long 
lead times before the work can actually begin.  In practice, 
while no single requirement is unduly onerous, sequencing 
issues constrain the prospect of advancing all of these 
processes in parallel and cumulatively threaten considerable 
delays -- perhaps years -- in the ability of U.S. industry to 
execute large projects in India.) 
 
¶17. (SBU) U.S. firms also expressed concern that India's 
Atomic Energy Act did not recognize patents in the nuclear 
industry.  Kakodkar confirmed that items for nuclear reactors 
do not receive patent protection under Indian law.  He added, 
due to prior experiences with Tarapur, "I think this will 
remain until the last bit of the embargo is removed."  (Note: 
 Ministry of External Affairs Joint Secretary for the 
Americas Gaitri Kumar later clarified that he was referring 
to restrictions on high technology exports to India.)  U.S. 
 
NEW DELHI 00000152  006 OF 006 
 
 
industry representatives noted that without patent protection 
they could not collaborate with Indian companies on 
developing new technology, and that they were concerned not 
only with protecting their own technology, but also had 
obligations to protect the intellectual property of their 
commercial partners.  Kakodkar dismissed the concern, saying 
any item on India's control list manufactured in India 
required a Department of Atomic Energy license, and U.S. 
firms could establish confidentiality arrangements in 
commercial contracts between the parties.  He noted that 
general purpose items that can be used in nuclear power 
plants do not receive patent protection.  Kakodkar concluded 
that General Electric built India's first nuclear reactors 
and India never violated patent rights.  U.S. industry 
representatives agreed their lawyers would explore options. 
 
Nonpro Policy:  Acute Sensitivities Remain 
- - - 
 
¶18. (SBU) The meeting with Kakodkar in particular was a 
reminder that nonproliferation remains a particularly 
sensitive issue in the emerging strategic partnership and 
that careful management will be required beyond the 
conclusion of the 123 Agreement.  Kakodkar opened the meeting 
January 15 saying that he felt "betrayed" by U.S. policy 
supporting a global ban on enrichment and reprocessing 
technology (ENR) in the Nuclear Suppliers Group (NSG), saying 
that it looked to be "directly targeting India" by requiring 
signature of the Nuclear Non-Proliferation Treaty (NPT).  He 
added, "The long term relationship we are developing is not 
consistent with this kind of negative development." 
(COMMENT:  The Ministry of External Affairs has been silent 
on the reprocessing issue, only asking for a read-out of 
Suppliers Group deliberations once they are releasable to 
non-participating governments.  It appears that while MEA may 
understand the U.S. position, Kakodkar felt stung by its 
implications for his expansive reprocessing ambitions. 
Differences over nonproliferation policy could continue to 
affect India's commercial decisions as it tests the limits of 
U.S. flexibility in the context of the emerging strategic 
partnership.) 
 
List of Meetings 
- - - 
 
¶19. (SBU) This report draws from meetings with the following 
government officials:  Minister of State in the Prime 
Minister's Office Prithviraj Chavan (Delhi, January 13); 
Minister of External Affairs Pranab Mukherjee (Delhi, January 
13); National Thermal Power Corporation (NTPC) Chairman D.K. 
Jain (Delhi, January 13); Planning Commission Deputy Chairman 
Montek Singh Ahluwalia (Delhi, January 14); Nuclear Power 
Corporation of India Limited (NPCIL) Chairman S.K. Jain 
(Delhi, January 14); Ministry of Power Secretary V.S. 
Sampath, Power Finance Corporation Chairman V.K. Garg, Power 
Grid Corporation Chairman S.K. Chaturvedi (Delhi, January 
14); Department of Atomic Energy Chairman Anil Kakodkar 
(Delhi, January 15); A FICCI-organized roundtable with Indian 
Parliamantarians; and additional technical and commercial 
sessions with NPCIL and Indian industry.  A planned meeting 
with senior opposition BJP leader L.K. Advani and colleagues 
did not take place. 
 
WHITE