NUCLEAR LIABILITY LAW

ü    Why did India enact a nuclear liability law?

§  As per the Department of Atomic Energy, India plans to increase its nuclear energy production to 20,000 Mwe by 2020 and 63,000 Mwe by 2032. Currently India has an installed capacity of 4560 Mwe. To increase the share of nuclear power, foreign companies would need to be involved in the manufacture and supply of nuclear reactors.

§  The nuclear liability law or the Civil Liability for Nuclear Damage Act, 2010, was enacted in order to attract the US companies involved in nuclear commerce such as General Electric and Westinghouse. The law would help these private companies in getting insurance cover in their home state. Thus, the law helped in the realization of the Indo-U.S. Nuclear deal of 2008.

§  Further, the nuclear liability law will legally and financially bind the operator and the government to provide relief to the affected population in the case of a nuclear accident.

ü    What are the concerns of nuclear suppliers regarding this law?

§  The Act has two unique features.

§  First, the operator would have the ability to reclaim any compensation it may pay from a supplier, by applying a subjective test, i.e., if the product or services have patent or latent defects or are substandard (right of recourse) (Section 17(b)).

§  Second, Section 46 of the Act has the effect of making the supplier subject to any other law in India that may apply to an industrial accident (e.g., criminal liability or a claim of damages under tort law).

§  Both aspects have caused significant anxiety to foreign governments and suppliers. No law anywhere in the world concerning nuclear liability places such broad liability principles on the supplier. The suppliers argued that the law goes beyond international rules. Liability law is being looked on as a "deterrent" for suppliers to sell into the Indian nuclear market.

ü  How can India allay the fears of nuclear suppliers about India’s nuclear liability law without amending it? 

§  The Act, as it stands, has various ambiguities in relation to the scope of supplier liability. These ambiguities are undoubtedly a hurdle for foreign suppliers and ought to be clarified or removed.

§  To allay the fears of nuclear suppliers, Government is working on a proposal with the public sector General Insurance Corporation to provide insurance cover to nuclear industry. Part of the process involves drawing up premium rates for specific parts of a power reactor so that the actuarial burden of any direct or indirect liability in the event of an accident can be quantified in advance and factored into any price negotiations between the Nuclear Power Corporation of India Ltd. and its Russian, U.S. and French suppliers.

ü  Is the Law biased in favour of nuclear industry? Some controversial aspects:

o  The Act effectively caps the maximum amount of liability in case of each nuclear accident at 77 million to be paid by the operator, and if the cost of the damage exceeds this amount special drawing rights up to 300 million will be paid by the central Government. This amount will be grossly inadequate in a severe case like nuclear accident.

§  While in most advanced countries the private sector is actively involved in nuclear power generation, in India it is controlled entirely by the government. The state-owned Nuclear power corporation is the sole producer of nuclear power in India. Consequently under nuclear liability laws, in the event of accident compensation that may be payable would have to be borne by these entities, means by the Government and therefore, ultimately by the taxpayers of India.

§  Section 17 of the Act allows only the operator (NPCIL) to sue the manufacturers and suppliers. Victims will not be able to sue anyone.

§  Section 18 of the Act limits the time to make a claim within 10 years. This is considered to be short as there may be long term damages.

§  According to section 35 of the Act the operator or the responsible persons in case of a nuclear accident will undergo the trial under Nuclear damage commission and no civil court is given the authority.

ü  Why it was recently in News ?:

1)  In some sections of media (19 September 2013, The Hindu), it was recently reported that the Attorney General has provided a legal opinion to the government opining that Section 17(a) provides for a right of recourse if such right is expressly provided for in a contract in writing and the operator is therefore free to choose not to incorporate such a provision in its contract with the supplier.

                       

§      It effectively means diluting the supplier’s liability as the Indian nuclear operators may have to waive their right of recourse against a foreign supplier in the event that an accident is caused by faulty equipment.

2)  It was remained a topic of concern between USA and India during the recent visit of Prime Minister Manmohan Singh to USA.

3) With suppliers raising concerns over certain aspects of the Nuclear Liability Act, the Department of Atomic Energy has decided to look into these worries to weed out "unnecessary liability".

The DAE has formed two committees to find out a middle path on the controversial issue keeping in view the concerns of foreign companies and Indian Atomic Industrial Forum (IAIF), of which NPCIL and companies that manufacture components for nuclear power plants are a part.

The recommendations made by the committee could also help weed out "unnecessary liability" which may not be applicable to many suppliers.

written by : Ms Vandana HirajiParmar