New Delhi: India’s state-owned Nuclear Power Corp. of India Ltd (NPCIL) and France’s Areva SA signed an agreement valued at €7 billion (Rs42,000 crore) for the supply of two nuclear reactors and fuel, but India’s euphoria over the deal may take a beating with recent reports in The Wall Street Journal (WSJ) and The Economist pointing to problems with the so-called European pressurized reactors (EPRs).

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While the agreement is seen as a boost to the strategic ties between the two countries and will help India’s quest for clean fuel to power its economic growth, the commercial contract is yet to be inked as there are several loose ends to be tied up. Areva said that it would like some clarifications on India’s Civil Liability for Nuclear Damages Bill that attracted the ire of US nuclear energy firms as well as lawmakers, but added that this wasn’t a major issue.

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The agreement deals with the supply of two EPRs each with a capacity to produce 1,650MW of electricity and uranium supply for a period of 25 years at Jaitapur in Maharashtra. These units are first of six that will be constructed at Jaitapur and are expected to be commissioned by 2018. The complex will have an overall capacity of 10,000MW. The world’s first EPR is still being built at Olkiluoto in Finland, and is some four years behind schedule and $3.2 billion (around Rs14,400 crore) above budget already, WSJreported last week. The Economist wrote in its 2 December issue: “India is discussing a deal for two French-built EPRs, but many customers in poor or middle-income countries do not think that a little extra safety is worth the hefty extra cost."

Although both NPCIL and Areva are yet to sign a final agreement, indications are they will.

“There are issues with regard to technical matters, including pricing. The prices will have to be negotiated. There will be no hidden surprises," said French President Nicolas Sarkozy, who is on a four-day visit to India that began on Saturday.

“There are still pending issues on financing. We have to fix the interest rates," added Anne Lauvergeon, chief executive officer of Areva, speaking to reporters soon after the deal was announced.

The preliminary pact gives Areva an edge over its rivals in the race to sell reactors to India.

The two countries also signed several additional agreements on the protection of confidentiality of technical data and information relating to peaceful uses of nuclear energy, deepening cooperation in research and education, and the multilateral efforts to promote peaceful uses of atomic energy.

Areva has also offered NPCIL an opportunity to invest in its uranium mines, participate in the various stages of the nuclear energy chain and is willing to share technology. The two firms may also seek nuclear opportunities overseas and the French company has expressed a desire to work together with India on fast-breeder reactors.

However, Lauvergeon said that there was a need for more clarity on “implementation rules" of India’s Civil Liability for Nuclear Damages Bill, but made it clear that the issue would not be a “deal breaker".

Countries such as the US have indicated their unhappiness with the Bill that trebles the liability cap on an operator from Rs500 crore to Rs1,500 crore and another that permits victims to seek compensation even 20 years after a nuclear accident.

“The responsibilities of supplier end where?... In case of problems, we are responsible for what? This is a complex issue," Lauvergeon said.

Russia is already constructing two nuclear power units in Tamil Nadu and hoping to sign a commercial contract for the building of more reactors as part of the same project.

The first two units are not going to be affected by the Nuclear Liability Bill as it predates the law. In the event of a nuclear accident, the operators, the Indian government and NPCIL, are responsible.

But regarding the additional reactors, Russia’s global nuclear project company Atomstroyexport JSC said on Sunday that “complex issues" about liability need to be addressed before firming up the contracts.

In the area of trade, both countries “renewed our determination to achieve the trade target of €12 billion by 2012", a joint statement said. Separately, India and France signed a memorandum of understanding between Invest India and Invest in France Agency to promote investment flows. Michelin, the French tyre manufacturer, also signed an agreement with the Tamil Nadu government to set up a production unit of radial tyres nearby Chennai with an investment of $1 billion.

Describing France as India’s “most important and reliable defence partner", Prime Minister Manmohan Singh appreciated France’s willingness to supply advanced defence technologies to India. Sarkozy welcomed the fact that both sides were close to a formal agreement on the modernization of Indian Air Force’s Mirage fighter aircraft and noted that Rafale, in the running for India’s $10 billion tender for 126 fighter aircraft, was at the cutting edge of technology.

On terrorism, Sarkozy asked Pakistan to fight the menace determinedly while applauding India’s efforts to make peace with its neighbour.

“With the tragic losses suffered in November 2008 terrorist attacks in Mumbai particularly in mind, we call for the active prosecution of the authors of such crimes and their accomplices, and urge that they be brought to justice expeditiously," the joint statement said.

Reporting a harmony of views on Afghanistan, Singh and Sarkozy expressed concern at the “continuing existence of safe havens and sanctuaries for terrorist groups beyond Afghanistan’s borders", without an explicit reference to Pakistan.

Asit Ranjan Mishra of Mint and PTI contributed to this story.