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A breakthrough with India's nuclear liability law?

Nuclear Monitor Issue: 

Nuclear suppliers from the US and some other countries have balked at investing in India's nuclear power program because of India's Civil Liability for Nuclear Damage Act 2010. The legislation does not completely indemnify nuclear suppliers, in particular suppliers of "equipment or material with patent or latent defects or sub-standard services."

Recent media reports have trumpeted a landmark, breakthrough deal between the US and India on the liability issue which will unlock billions in investments. But a joint statement released by President Obama and Prime Minister Modi was more circumspect and vague, welcoming "understandings reached" on the issue.1

It seems likely any agreement would involve a nuclear accident insurance pool − possibly amounting to around US$250 million (€222m), and possibly with contributions from the Indian government and from five Indian government-owned insurance companies.2

But insurance pool or no insurance pool, suppliers would likely still be vulnerable to legal challenge unless Indian legislation is amended (as the US has been demanding), and it seems unlikely that the Indian government is prepared to attempt to change the legislation (or whether any such attempt would win parliamentary approval). Modi's recent statement − "we are moving towards commercial cooperation, consistent with our law" − suggests no appetite to attempt to amend the legislation.

Details remain vague, The Guardian noted on January 26, and officials stressed they were still working out the finer arrangements of the scheme, which is designed to avoid the need to change Indian law. "We think we came to an understanding of the liability" issue, said the US ambassador to Delhi, Richard Verma, which will operate "through a memorandum of law within the Indian system".3

Even if the liability issue is resolved to the satisfaction of nuclear suppliers in the US and elsewhere, other obstacles will slow the development of nuclear power in India, not least finance and public opposition.

And if nuclear suppliers believe they are indemnified, that in itself is a problem. Siddharth Varadarajan from Shiv Nadar University writes:

"US companies say that exposing them to damage claims, either by the operator of a nuclear facility or the victims of an accident, would make them unviable commercially since they would be liable for potentially unlimited claims.

"Let us parse this argument carefully. On the one hand, suppliers argue that their reactors are so safe that the probability of an accident is virtually zero. On the other, they argue that the damages from an accident are potentially so enormous that they would go bankrupt if they were held liable in any way. The latter statement is true, considering the Fukushima clean up has cost nearly $20 billion already. While this circle should be squared by asking suppliers to put their insurance money where their safety mouth is, all international liability regimes like the compensation treaty [Convention on Supplementary Compensation for Nuclear Damage] and the Paris and Vienna Conventions shift the burden entirely on to the operator.

"This is absurd from an economic standpoint. While designing a reactor, how can a supplier decide what the optimum level of safety is if he is not forced to internalise the cost of an accident in some way? Nuclear regulators play an important role in the design and implementation of safety features but can never fully substitute for liability-driven incentives."4

In addition to progress on the liability issue, Obama and Modi claimed to have made progress on another sticking-point: India's reluctance to allow the tracking of nuclear materials through the nuclear fuel cycle to guard against diversion for weapons. In their joint statement, Modi and Obama said they welcomed "understandings reached on ... administrative arrangements for civil nuclear cooperation".

But as with the liability issue, detail is lacking. NDTV (New Delhi Television) cited "sources" saying the US "has forfeited its demand on insistence on "flagging" or tracking the nuclear material they supply to India, required under its rules to ensure it is not being used for military purposes."5 According to The Guardian, the opposite is true: "India will also allow closer tracking of spent fuel to limit the risk of it falling into terrorist hands."3


1. WNN, 26 Jan 2015, 'Deal close for Indian reactor imports',
2. M Saraswathy, 26 Jan 2015, 'Insurers to offer Rs 750 cr capacity for nuclear pool; rest from govt',
3. Dan Roberts, 26 Jan 2015, 'Obama and Modi agree to limit US liability in case of nuclear disaster',
4. Siddharth Varadarajan, 25 Jan 2014, 'Why India should say no to US demand to dilute its nuclear liability law',
5. 25 Jan 2015, 'The Short Walk Home. How PM Modi, President Barack Obama Clinched Nuclear Deal',