Business cost for global firms to rise as India tweaks nuclear bill

The changes, if approved, would mean higher costs for firms such as U.S.-based General Electric Co (GE.N) and Westinghouse Electric Co, a subsidiary of Japan's Toshiba Corp (6502.T), which would have to pay higher insurance premiums.

U.S. companies already lag Russian and French firms, whose governments underwrite their liability, in doing business in India. The Russians and French are already working to set up nuclear reactors in India.

The revised draft marks another instance of policy climbdown by the government in the face of political pressure. But it will help deflect criticism that the bill gave Indian lives at least 23 times less worth than Americans.

The original draft law suggested capping liability at about $110 million on the state-run reactor operator without placing any compensation burden on private suppliers and contractors.

State compensation was capped at up to 300 million special drawing rights. Opposition leaders says the liability of a U.S. operator under U.S. legislation is $12.5 billion.

But opposition parties have forced a rethink. Government officials said the revised bill could now set the compensation liability of an operator at up to $400 million, with a provision that the government can alter this amount.

The new draft will also make private firms responsible as well if a fault is found with their equipment or services.

The bill was introduced in parliament earlier in the year but opposition protests forced it to be referred to a parliamentary panel for scrutiny. The panel, which suggested the changes, is expected to submit its report on Thursday.

"The idea was to cover all the possible areas of conflict and disagreement and any escape hatches in the event of an accident," a member of the panel said on condition of anonymity.

The bill has the personal backing of Prime Minister Manmohan Singh whose 2008 deal with former U.S. president George Bush ended India's isolation in the global nuclear market.

The government is keen on ratifying the nuclear bill and smoothing entry for global firms, including those from the United States, before President Barack Obama's November visit to India.

But the bill, which will be sent back to parliament possibly by next week, could be delayed further.

The main opposition Hindu-nationalist Bharatiya Janata Party (BJP) has sought clarification on the need to have a liability cap on operators because in India the nuclear power sector is state controlled and all plants are owned by the government.

There are other hurdles as well. The political mood in the country has hardened as the BJP and the government lock horns over several issues, including high prices.

The opposition is also attacking the government over delayed justice in the world's worst industrial disaster in the city of Bhopal where a gas leak in a Union Carbide factory killed thousands of people 25 years ago.

That accident has made Indians sensitive to the issue of nuclear power, seen as a key component in India's search for energy sources to power its goal of double-digit growth.

"Today the public mood within the country is that you must put in place systems to ensure that should there be another disaster there should be a proper compensation mechanism," said political commentator Paranjoy Guha Thakurta.