Advancing Nuclear Energy Partnership: India and the U.S. Address Liability Issues

In a major breakthrough for strategic relations, the U.S.-India Civil Nuclear Cooperation Agreement that was signed nearly two decades ago has taken a breath of fresh air. First announced in 2005, but stalled in practice as many aspects of the agreement could not yet be operationalized, officials on both sides have now made announcements aimed at unraveling its untapped potential with renewed enthusiasm. Even though some kinks remain to be ironed out in implementing the deal, the greatest achievement of the agreement lies in the fact that such a unique and unprecedented deal could be conceptualized, negotiated, and concluded, marking a strategic, diplomatic, and geopolitical success that elevated U.S.-India relations.

Background of the U.S.-India nuclear relations

The U.S. had been critical and concerned after the 1974 nuclear tests conducted by India and tightened its nuclear-related exports to India to control arms proliferation. Following the second round of testing by a non-NPT (Nuclear Proliferation Treaty) signatory India in 1998, the U.S. this time reacted strongly by imposing economic sanctions under the Glenn Amendment to the U.S. Arms Export Control Act (1977), which prohibits assistance to a non-nuclear weapon state that has detonated a nuclear device.

India, as a state that was ascending rapidly, was seeking to pursue its national interests with an uncompromising vigor. India, therefore, refused to sign the nuclear Non-Proliferation Treaty in 1968 which it considered was creating unfair distinctions between those states that already had a nuclear weapons programme and those states that did not yet have it or were in the process of developing one. When the U.S. offered a civil nuclear agreement to India, which would end the thirty years of seclusion that India faced by the international community, it was seen as an inexplicable U-turn with regard to stated American objectives of global nuclear non-proliferation. President George W. Bush’s decision to give India an exception from the tough NPT was significant for India as it allowed it to retain its nuclear weapons as well as 35 percent of its nuclear capacity. The deal became a subject of much debate in India and even though it was eventually signed, bilateral agreement did not come easy for either side, and the deal had its share of hiccups with the disagreement on the nuclear liability clause still sticking out like a sore thumb.

While many other states including Pakistan expressed displeasure with the idea of nuclear ‘exceptionalism’ given to India, yet these concerns were promptly set aside by American policymakers.

Negotiations of the agreement

The ultimate conclusion of the nuclear deal featured a large amount of background discussions and negotiations between both states as partners, as well as individually domestically within the two states. The Bush administration faced a massive backlash from various political factions. In 2008, Prime Minister Singh, whose government had made nuclear power a focal national policy narrative, went through a vote of no confidence in Parliament, which almost toppled his government. Additionally, the international scepticism to the deal largely focused on three assertions that: 

1. The deal will serve to normalize India’s status as a nuclear weapon state while it stays comfortably outside the NPT.

2. It will undermine the NPT and the larger nonproliferation regime.

3. It may serve to increase the production of India’s potential nuclear weapon capabilities, and thus thwart international efforts to cease the production of fissile materials for nuclear weapons.

Yet, the fact that the agreement came to fruition despite all odds, proved two major points about the U.S.-India partnership.

1. India and the US had common interests as democracies, and that India’s nuclear weapons did not threaten the geopolitical interests of the U.S. The agreement opened the gates for India to enter the elite club of nuclear weapons states as well as elevated its status to that of a responsible nuclear power.

2. While many other states including Pakistan expressed displeasure with the idea of nuclear ‘exceptionalism’ given to India, yet these concerns were promptly set aside by American policymakers. The core of their agreement, in the area of nuclear energy, was the emphasis on non- proliferation of Weapons of Mass Destruction (WMD). Even though India did not officially join the Non-Proliferation Treaty (NPT), through this agreement it was afforded the same benefits and advantages as other leading nuclear powers, while it remained committed to goals of global non-proliferation.

Achievements of the deal

Negotiations between the U.S. and India over the Indian nuclear program centered around India agreeing to separate its civil and military nuclear facilities and to place all its civil nuclear facilities under International Atomic Energy Agency (IAEA) safeguards, in exchange for the United States agreeing to work toward full civil nuclear cooperation with India. With regard to geopolitical reasons that contributed to finalizing the deal, it was seen as a deliberate attempt by the U.S. to break away from Pakistan in the South Asian region and align itself with the more stable and economically beneficial democratic India, for greater interests in the region. For India, the deal was seen as an entry into the nuclear weapon states club i.e. furthering its national interest of normalizing its status as a nuclear weapon state while it remained outside the NPT.

As India was already engaged in a rivalry with both Pakistan and China, India had made it clear early on that it was not willing to accept any unilateral constraints on its nuclear arsenal due to regional security concerns. What India offered to give up in order to have a civil nuclear relationship with the U.S. was included in the following main features of the agreement:

1. India would separate its civilian and military nuclear facilities. India’s impetus to continue developing its nuclear facilities was in response to a heavy reliance on fossil fuels to meet its energy needs. Thus, nuclear energy was expected to help in the sustainable development of India’s economy.

2. India would place its civil nuclear facilities under the International Atomic Energy Agency (IAEA) safeguards.

3. India would refrain from transfer of enrichment and reprocessing technologies to states that did not have them and continue to support international efforts to limit the spread of nuclear proliferation, even though it remained a NPT non-signatory state.

Implementation of the deal

Even though the deal is considered a major strategic achievement of the U.S.-India partnership, its full implementation has been slow and incomplete due to a range of legal and technical issues, the most significant of which has been the Civil Liability for Nuclear Damage Act (2010), India’s domestic legislation that governs nuclear liability.

India has adopted a stringent liability clause under sustained pressure from activists which vests greater responsibilities on the manufacturers. Foreign companies, including the U.S., France, Canada and Russia, are concerned that this law disproportionately burdens suppliers of nuclear equipment with payments in case of an accident. American companies are especially disgruntled that even after several years of the India-U.S. nuclear deal, they have not reaped the commercial benefits that they had hoped. It was particularly ‘the right to recourse’ under which the operator (Indian government via Nuclear Power Corporation of India Limited) could seek recourse from the supplier (any foreign firm) under Section 17(b) of the act, which states:

“The operator of the nuclear installation, after paying the compensation for nuclear damage in accordance with section 6, shall have a right of recourse where –

(b) the nuclear incident has resulted as a consequence of an act of the supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services…”

Inclusion of this clause has been considered risky and a deviation from existing liability clauses in other countries, leading to hesitation in the minds of American corporations to supply equipment to India.

Recent Developments: Future Vision   

As part of the COMPACT agreement, in February 2025, Indian Prime Minister Narendra Modi and the U.S. President Donald Trump reaffirmed their commitment to fully implement the U.S.-India Civil Nuclear Agreement and facilitate reactor construction, local manufacturing, tech transfer, and boosting private sector partnerships. The initial steps towards this had begun in January 2025 when the U.S. National Security Advisor Jake Sullivan announced that Washington is removing long-standing regulations on Indian entities that have prevented U.S. companies from pursuing civil nuclear cooperation with India. This led to the U.S. Bureau of Industry and Security (BIS) removing three Indian nuclear entities, Bhabha Atomic Research Centre (BARC); Indira Gandhi Centre for Atomic Research (IGCAR); and the Indian Rare Earths Limited (IREL), from its Entity List. These export restrictions and licensing requirements under the ‘Entity List’ are generally placed on organisations which could potentially indulge in commercial activities that are in the realm of terrorism and weapons of mass destruction (WMD) programmes, and are against the security interests of the U.S..

Furthermore, the U.S. and India have launched the TRUST (Transforming the Relationship Utilizing Strategic Technology) initiative. This is aimed to promote collaboration in critical and emerging technologies, including energy, defense, artificial intelligence, semiconductors, quantum, biotechnology, and space, and encourages the use of verified technology vendors and ensures sensitive technologies are protected. ​

The Indian government has announced its plans to amend its Civil Liability for Nuclear Damage Act, which places liability on foreign suppliers in  case of a nuclear accident, to align India’s laws with international norms that predominantly place responsibility for operational safety on the plant operator rather than the equipment supplier. The proposed amendments also include a lower liability cap for small reactor operators. These incentives for both Indian and American firms are expected to encourage increased trade and collaboration.

India has committed over $2 billion toward nuclear energy research, as it plans to overturn its heavy dependence on fossil fuels (75%) for energy generation, with a goal to install 100 gigawatts of nuclear power by 2047. Even though it is more expensive, the reliability and cleanliness of nuclear power is expected to contribute to a global upsurge in nuclear energy installations and the U.S.and India can already be seen making inroads in the sector.

Dr. Shivani Yadav is a Research Fellow at the America Program of the Sixteenth Council