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Sunday, 20 November 2011 07:53
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Nuclear family, ahoy!

Liability rules set stage for nuclear power leap


With the Rules of the Civil Liability for Nuclear Damages Act now addressing the fears of nuclear power suppliers, India is all set to start moving to achieve its target of 20,000 MW of nuclear power capacity by 2020, 63,000 MW by 2030 and, finally, to get 25% of its power capacity by 2050 from nuclear power plants. On the face of things, the Rules do look one-sided, and will certainly upset the BJP since on its insistence, the government had given in on the nuclear liability issue. While the public sector Nuclear Power Corporation of India Limited, the only body that can set up and run nuclear power plants in the country, has to bear a no-faults compensation of up to R1,500 crore immediately—if the damage is more, the government will make good the balance—with the BJP-sponsored amendment, NPCIL would be able to sue the power equipment firms for damages in case their equipment was found to be faulty. This, contrary to what many think, includes not just the Arevas and GEs of the the world since Indian firms like L&T are also getting into supplying nuclear equipment—by the time Areva’s 5th and 6th plants in India are up, the local content will be 70%.

To that extent, the Rules, which limit the supplier’s liability to the length of the guarantee period, typically 5 years, look like they’re letting suppliers off lightly. The reality is more nuanced. First, though not the most important, proving defects in nuclear power plants is notoriously difficult, so just having this on the statute may be of limited help. Two, since there are no insurance products for nuclear power equipment firms—there is the possibility of a pooled insurance for power producers once the international laws are ratified—this will ensure the plants never get off the ground. Third, which is more important, is that it is not fair to hold a supplier guilty for the performance of a product that he does not run—if, for the sake of argument, NPCIL fails to do periodic maintenance of an Areva power plant, and that causes it to explode, how can Areva be held responsible? Indeed, the only organisation that can be held responsible, other than NPCIL, is the regulator since it is the regulator’s job to inspect the plant regularly to ensure all standards are being met. To that extent, limiting the unlimited liability to the length of the guarantee period is a welcome compromise as any defects will be apparent by then.



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