The deal with the IAEA, under negotiation since late 2007, is the latest move in a long and tortuous path to the removal of the three and a half decade international nuclear trade embargo on India. The removal of the embargo began in July 2005 when India and the US signed a nuclear cooperation agreement.

Though nuclear power contributes only 2.5 % of India’s electricity, that percentage will likely rise. India is planning to import at least eight new nuclear reactors by 2012. The state-owned Nuclear Power Corporation of India Limited (NPCIL), that oversees all nuclear power production in India today, now operates 17 reactors, and it is building five new nuclear plants and has plans to open four more.

All told, NPCIL has plans to add 16 gigawatts of new nuclear capacity to the existing capacity of 4 GW (now operating at just 40% of capacity due to inadequate fuel) by 2020.

Last month, French nuclear giant Areva signed an agreement with NPCIL to provide India with up to six new reactors valued at about $12.5 billion. Areva will use its European Pressurized Reactor design and provide India with fuel for the life of the reactors. The NPCIL-Areva pact is the first commercial agreement for supply of nuclear reactors since the Nuclear Suppliers Group, a global consortium of nuclear countries, lifted the ban on India last year.

NPCIL has also signed a contract with Russian company TVEL Corporation for the supply of uranium. And in January, Kazakhstan’s state owned nuclear holding company, Kazatomprom, signed a deal that will allow it to supply uranium to Indian nuclear facilities.

Other suppliers are standing at the ready. Discussions are ongoing with America’s General Electric and Westinghouse Electric, Japan’s Toshiba and Hitachi. Russia’s Rosatom will also likely be involved with India’s nuclear program. GE has said that the company would be leveraging its joint venture with Hitachi for entering the Indian market and is open to local partnerships.

Long-time ally Russia is already helping India build two 1,000 megawatt light water reactors at Kundakulum in Tamil Nadu. Reports suggest that New Delhi and

Moscow have agreed to build six additional reactors.

The competition is going to be stiff among countries and companies. The US wants to get its share of the contracts in return for pushing India’s nuclear exception status; the French will emphasize their experience in generating nuclear power; Japan will underline their technical superiority; and Russia will build on its position as India’s long-term and trusted partner. This competition for contracts can only augur well for India.

That said, a number of issues must still be surmounted. The Indian Atomic Energy Act 1962 still needs to be amended in order direct private sector ownership of nuclear power entities possible in India. Till then, private players can be involved in nuclear power generation only via collaboration with centrally regulated nuclear entities like NPCIL and they may only own minority stakes.

India will also need to strengthen its regulatory system to assure the safety of the new plants. Further, the country must decide how it will handle nuclear waste and reprocessing. While all of those issues remain to be resolve, it’s clear that India will be one of the world’s most active markets for nuclear power in the coming years.