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Nuclear reactor deal set to strengthen ties between France and India

From Sumnima Udas, CNN
  • A deal will allow a French company to build two nuclear reactors in western India
  • The agreement is worth $9.3 billion
  • A professor says terms of the contract are "very much in the air"
  • It is among $20 billion in contracts Sarkozy is bringing back to France

New Delhi, India (CNN) -- French President Nicolas Sarkozy wrapped up his four-day visit to India on Tuesday, securing defense, energy and aviation deals worth billions of dollars.

Headlines heralded a significant breakthrough -- a framework agreement signed by India and France that will allow French energy group Areva SA to build two nuclear reactors in India's western state of Maharashtra and to supply fuel for 25 years.

The deal, worth $9.3 billion, is set to boost strategic ties between the two countries and help feed India's growing demand for energy.

But it may be too early to celebrate, said Brahma Chellaney, a professor of strategic studies at the Center of Policy Research in New Delhi

While an agreement has been reached, the precise terms of the commercial contract are still "very much in the air," Chellaney warned.

"France is selling India nuclear reactors which are completely untried for design and safety, so there might be criticism in India in days to come about the choice of reactors," he said.

At a joint press conference, Indian Prime Minister Manmohan Singh said negotiations had reached "an advanced stage," but local media reports indicate that India's nuclear liability law, which holds suppliers liable for damages, could also be a stumbling block.

Areva SA's Chief Executive Officer Anne Lauvergeon said that while the French want "more clarity" on the Indian liability law, the issue would not be "a deal-breaker."

Preparations for the construction of the two reactors may start in early 2011, Lauvergeon said.

The pact, signed by Areva and state-owned Nuclear Power Corporation of India, for two 1650 MW nuclear power units is the first of a series of six that are planned at Jaitapur in Maharashtra.

Hundreds of villagers and farmers have been protesting near the site, claiming they have been denied compensation.

Greenpeace is also protesting the plan, arguing that the proposed site is in an "extremely risky" earthquake zone.

India's Ministry of Environment gave the project a go-ahead last month.

India has 20 operational nuclear reactors and is seeking to expand its energy sector to meet the rising energy demands.

The country is also a huge market for infrastructure and defense supplies.

"India is importing $8 billion worth of defense equipment every year. That's $80 billion over a period of 10 years. That's a huge market to tap if you're a defense supplier," Chellaney says.

Some of the other agreements signed between India and France include Air India and Jet Airways leasing airbus aircrafts in separate deals worth $3.7 billion.

French tire-maker Michelin signed a deal to invest $800 million in a factory in the southern state of Tamil Nadu. Talks are also underway for defense electronics group Thales to upgrade India's ageing air force.

In total, Sarkozy will return to France with contracts worth $20 billion, Chellaney said -- "roughly the same amount or more than what (U.S.) President (Barack) Obama recently took home."

Sarkozy also supported India's bid for a permanent seat on the United Nations Security Council.

"This is injustice. ... It is unthinkable to imagine that the 1 billion people of India are not represented in the Security Council," Sarkozy said.

On Tuesday, Sarkozy and French first lady Carla Bruni-Sarkozy paid homage to victims of the attacks of the November 2008 terroirst attacks in Mumbai, India, and called upon Pakistani authorities to "show they are resolute in combating terrorism."

Sarkozy is one of many world leaders to visit India this year.

Obama and British Prime Minister David Cameron were both recently in India.

Chinese Premier Wen Jiabao and Russian President Dmitry Medvedev are also scheduled to visit New Delhi this month.