There has been little attention paid to it here in the U.S., but the U.S.-Indian nuclear deal now appears to be in some greater trouble in India. Rajeev Sharma writes at The Diplomat‘s Indian Decade? blog:

Indian concerns about the Nuclear Suppliers’ Group’s recent hardening of Enrichment and Reprocessing technology transfer terms remained unaddressed, while Clinton instead conveyed Washington’s annoyance over Indian nuclear liability laws, which make it possible to seek compensation from suppliers, and asked the UPA government to tweak them further to conform with international liability norms. She also asked India to negotiate with the International Atomic Energy Agency on the legislation, even though there’s no international legal requirement to do so. Finally, she spoke of some ‘remaining issues’ that need to be tackled to enable full implementation of the Indo-US civilian nuclear energy cooperation agreement.

What Clinton didn’t say directly, but what she likely meant, was that unless India dilutes its nuclear liability laws, full implementation of the deal will remain a mirage. It’s clear that although officially the United States is insisting that it will fully implement the nuclear deal, the agreement faces yet another phase of diplomatic rough and tumble.

The UPA government can’t contemplate diluting the liability laws due to massive domestic pressure. Virtually the entire opposition, from left to right, has pressured Prime Minister Manmohan Singh into hardening liability legislation. Tinkering with this now would therefore be political suicide for his government. [bold mine-DL]

For all of the American commentary on Clinton’s visit to India, Sharma’s analysis is the first detailed analysis of the political obstacles blocking implementation of the nuclear deal that I have seen so far. Sharma concludes:

Clearly, Clinton has stepped on a political landmine in India. Expect more political parties to pile on over this issue.

Update: This editorial from The Hindu makes the same arguments against diluting the liability laws:

However, Parliament, and ultimately the government, were unwilling to waive the normal operation of tort law and accordingly incorporated two provisions that might expose suppliers to damage claims if a nuclear accident is traced to defective equipment. Against the backdrop of public outrage over the scandalous denouement of the Bhopal gas disaster cases, it is a miracle that the law is not tougher.

The U.S. believes these provisions are incompatible with the CSC and hopes the implementation rules being drawn up will firmly shut the door on supplier liability. Even if such a thing were legally possible — which it isn’t, since rules cannot upend the basic intent of a law — Dr. Singh can ill afford the political firestorm that any dilution of the liability Act would set off. During her visit, Ms Clinton also encouraged India to consult the International Atomic Energy Agency on the compatibility of its law with the CSC — an absurd suggestion since the IAEA has no locus. At a time when the whole world is still digesting the environmental and financial consequences of the Fukushima-Daiichi nuclear calamity, Washington must reconcile itself to the fact that the Indian body politic will not accept any dilution in existing liability provisions. Rather than exerting political pressure, U.S. vendors should bite the bullet and accept this as the price they will have to pay to win a share of the lucrative Indian nuclear power industry. If insurance costs lead to higher reactor prices, so be it. It is better to know the true cost of nuclear energy before buying thousands of megawatts worth of reactor equipment than pay for a multi-billion dollar cleanup the way Japanese taxpayers are now being forced to do.