Lack of clarity on liability will hit Indian firms too
While the debate over whether, to coincide with the prime minister’s visit to the US, India is changing the Civil Liability for Nuclear Damage Act centres around this being done to serve the interests of US suppliers like Westinghouse, what it misses is that, over a pretty short period of time, this will hit Indian firms as well. Firms like L&T, for instance, are in the running to partner with global suppliers to produce such equipment; others like HCC are in the business of doing the civil works for even existing plants. In the case of French firm Areva that is supplying nuclear plants to India, for instance, while the initial 2 plants will have a 40% local component including the construction costs, this will rise to 60-70% by the time the 6th and 7th reactors are commissioned.
While critics argue that just because Indian firms are going to be hit by a law is no reason to change it, the issue here is different. Under the current law, if there is a nuclear accident, the operator will pay for the immediate damages—the operator in this case is the government-owned Nuclear Power Corporation of India Limited (NPCIL). This will be what is called a ‘no faults’ compensation; that is, it doesn’t matter whose fault it is, NPCIL will pay up R1,500 crore immediately and if more is needed, the government will pay up. The question is what happens after this. Surely, NPCIL should, the argument goes, be allowed to claim damages from the supplier? Under the Rules of the Act, this recourse is to be limited to the initial period of the license which is 5 years or the life of the product liability offered by the supplier in case that is longer.
While many argue this is allowing nuclear plant suppliers to go scot free in case their defective plants caused the accident, how can a supplier be held responsible for the damage if the plant is being run by NPCIL? If NPCIL doesn’t observe some safety standards, or the atomic energy regulator doesn’t enforce this, how is the supplier to be held responsible? Indeed, the international practice is that nuclear plant operators bear the responsibility, not suppliers—which means India pretty much wants the world to do business in a way they do nowhere else. And the reason why this is so even in the US where product liability laws are very stringent is that proving an accident took place because of faulty equipment and not faulty use of the equipment is a gargantuan task. Which is why the Convention on Supplementary Compensation for Nuclear Damage (CSC) that India has signed, but not ratified, puts the onus on only the operator but plans for a fund that every country contributes to—in the event of a disaster, the fund takes care of the costs. There is a practical problem with the way India’s current law stands—no insurance company will sell unlimited liability insurance and, without that, no supplier—not even an Indian one—will supply the equipment.