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Both these previous administrations had made the NPT and NSG the center of their nuclear foreign policies. The NPT and NSG put in place a set of rules basically designed to punish India and deny it high-tech hardware. In the seventies India was economically weak -- so was China, except China had the U.N. Security Council veto in its pocket -- and could be pushed around. Never did the authors of the treaty think that times might change, that India might come from behind and achieve phenomenal economic success. Then it would be foolhardy to deny a nation of 1.1 billion people with a trillion-dollar economy (expected in 2008-09) important aspects of technology.
With this in mind, Bush and Singh decided to remedy the imbalance so the United States could accept India as a partner in nuclear energy development. This was not acceptable to the U.S. nuclear lobby, however, which worked hard to derail the Indo-U.S. agreement on civilian nuclear cooperation. The Henry J. Hyde U.S.-India Peaceful Atomic Energy Cooperation Act, passed in 2006 by the U.S. Congress, deviated from the 2005 understanding as it excluded the sale of technologies that could be used for uranium enrichment, spent-fuel reprocessing and heavy-water production.
Later, India thought that the final operating rules and regulations -- to be defined in a bilateral pact currently under negotiation, called the 123 Agreement -- would circumvent the awkward clauses in the Henry Hyde Act. It seems that negotiating the 123 rule changes is proving as difficult as getting the Henry Hyde Act through Congress, however. The nuclear lobby may finally achieve its objective, which could derail the Indo-U.S. nuclear deal.
India does not wish to completely forgo its right to conduct nuclear tests if it feels a provocation to its security is too great. It will never give up development of its fast breeder reactors, nor will it stop processing spent fuel. The Bush-Singh agreement was an innocuous sort of deal between two heads of government that recognized each other's importance in strategic terms. India needs the United States for its continued economic progress. The United States needs Indian brainpower for cheap information technology, business and knowledge-processing outsourcing services. Also, India is the only U.S. ally in the Indian Ocean littoral states, which will ensure open sea lanes from Suez to Singapore and keep Pakistan and its Mullahs in check.
This sort of understanding of each other's position should be sufficient to facilitate each other's interests. Then why was the U.S. lobby allowed to raise objections and get its way, at least partially, in the passage of the Henry Hyde Act? Part of the reason is that President Bush is politically weakened by a lack of success in Iraq. When the Henry Hyde Act was passed, he was fighting for his party's political survival in the Congressional elections. The opposition extracted a pound of flesh by weakening the Act and not clearly stating that India is welcome in the nuclear fraternity. Hence, today's discussions on 123 rule changes are proceeding slowly, and may in the end prove fruitless. India may walk out of the deal and the economies on both sides may suffer.
If by the end of this year the 123 Agreement is not concluded satisfactorily, India will be left with little choice but to quietly forgo the nuclear deal. There are already indications that this may occur; the first is U.S. State Department official Nicholas Burn's statement after a recent meeting with his Indian counterpart that the U.S. has done whatever it could do for the deal and now it is India's turn. He was highlighting the U.S. inability to maneuver on the above-mentioned sticking points in the Henry Hyde Act. Second, India has developed a renewed interest in gas from Iran, after putting it on the back burner for a year. Third, a row over the procurement of banned hardware by India in the United States is putting a strain on negotiations. The United States cannot play hardball on this, as they have been accused of spying in places as high as the prime minister's office.
India has meager natural energy resources of its own. Almost all the hydropower, barring a little in Jammu and Kashmir, Himachal Pradesh and Uttaranchal Pradesh, has been tapped. India does not have inexhaustible coal supplies. Moreover, excessive coal burning has a detrimental impact on the environment. Natural gas discoveries in the Arabian Sea and Bay of Bengal are not large enough to satisfy the growing needs. Hence India is left with two alternatives: nuclear power or gas from the Middle East. The latter could come easily via a pipeline through Pakistan or with difficulty as liquefied gas in tankers.
The current state of power generation in India is bleak. There is an overall 12 percent power shortage in the country; in some areas shortages are much higher. Central and state governments generate the bulk of the power, 58 percent and 32 percent respectively. The private sector generates a meager 10 percent of the total power. Coal is used to generate 60 percent of the power, hydropower accounts for 26 percent, gas for 10 percent and nuclear for 3 percent. The remaining 1 percent is generated using a mix of diesel and fuel oil.
As the economy grows at 8-9 percent a year for the next 15 years, power generation will have to fill up the previous gap plus grow at a rate of about 10 percent per year. That means, unless power generation capacity boosts up well above 10-12 percent a year, Indian industry and agriculture will find it difficult to maintain the momentum it has created in the last five years.
Hence nuclear or gas has to come to the rescue. Today, bringing gas to India will face serious difficulties. First, the United States is totally and completely opposed to it. Second, paying high transit fees to cross hostile Pakistani territory makes it totally uneconomical. Also, an unhappy United States could forbid its companies and European subsidiaries to bid on gas pipeline contracts. It may deny monetary support, which would make implementation of this project impossible. In addition, the huge sums of cash Pakistan would collect in transit fees -- as much as US$500 million a year - would be sufficient to arm the country with newer weapons.
India's current nuclear installed capacity is 3,000 megawatts. By 2030, this has to be boosted to about 30,000 megawatts. In the next 20 years about 27 nuclear generation units, each with 1,000 megawatt capacities, will have to be built at a cost of US$100 billion. This is a huge business, which any country would wish to have. The United States is first in line. In addition, countries like Australia, Canada and the United States will benefit immensely through uranium exports, as India has no uranium of its own and must import it. Hence, it is difficult to understand why the U.S. administration and politicians are being stingy in finalizing the deal.
The alternative to gas and nuclear energy is coal. Rough estimates are that to generate that much power using domestic and imported coal, an additional 130 million tons of carbon dioxide would enter the atmosphere. That would bring catastrophic change to the environment and hasten the end of planet Earth. Therefore, a nuclear deal is not only important to India but also to the rest of the world.
Let us hope that U.S. and Indian politicians and officials cool off the rhetoric and begin the serious task of circumventing the misunderstandings in the Henry Hyde Act. If this requires that a supplementary law be enacted by the United States to remove all the misgivings in the aforementioned Act, so be it.
