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Nuclear Projects Delayed

India’s nuclear politics was in the limelight again, and not for the best of reasons. More than five years after it signed the Convention on Supplementary Compensation (CSC), India ratified the insurance pooling agreement, which pertains to civil liability in the event of a nuclear accident in any of the acceding countries. Prima facie, this was a good move, bringing to an end a game of will-they-or-won’t-they, which had cast India in poor light internationally and which sat uncomfortably beside three hard-fought nuclear landmarks — the India-U.S. Civil Nuclear Agreement (CNA) and the Nuclear Suppliers Group (NSG) waiver, both passed in 2008, and India’s Civil Liability for Nuclear Damage Act (CLNDA), which became law in 2010. However, India’s CSC ratification does not clear the air so far as an important stumbling block to bilateral nuclear commerce is concerned: is CLNDA truly in conformity with the CSC, as Indian officials have repeatedly claimed, or does it cast a shadow of doubt on supplier liability, which is a matter of critical importance to U.S. nuclear corporations? The ambiguity stems from two clauses of CLNDA, Sections 17(b) and 46. Under Section 17(b), liability for a nuclear accident can be channelled from the operator, which is the Nuclear Power Corporation of India, to suppliers of nuclear material, specifically if the accident is due to an act of the supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services. Section 46 permits victims of a nuclear incident to sue the operator or the supplier for damages applying tort law, even though such proceedings would be beyond the scope of CLNDA and its liability cap, and thus exposing suppliers to unlimited liability.

Both clauses are likely to raise suppliers’ cost of insurance cover, possibly beyond what is feasible commercially and within the confines of competitive energy pricing.

India’s CSC ratification is a reminder of the steep fall from the heady days of the announcement of the CNA a decade ago to the weak and unconvincing efforts by the Narendra Modi administration, following U.S. President Barack Obama’s visit to India, to persuade corporations such as General Electric-Hitachi and Westinghouse that they would not be liable in the event of an accident. India’s reliance on contractual rules and parliamentary debates to explain away supplier concerns has been greeted with scepticism by representatives of U.S. nuclear corporations — first on the grounds that no rule can supersede constitutional statute, and second, as there are other, on-record views in Parliament that contradict those cited by the MEA. While the liability morass has stymied U.S. investment in Indian reactors, Russia, France and Japan have moved forward with their respective bilateral agreements for nuclear commerce. This suggests that the recognition of India as a responsible nuclear power by the international community — the U.S. and the other NSG states — has allowed for windows of opportunity for nuclear commerce in India, even in the post-Fukushima world.