New Delhi: The Lok Sabha, the Lower House of Parliament, on Wednesday passed the Civil Liability for Nuclear Damages Bill 2010 with a voice vote, after the government, under pressure from the Opposition, effected a major climbdown from its initial position.

India is now a step away from a new legislation that will put in place a compensation regime that defines the liabilities of private companies investing in the nuclear energy sector—a law that many see as a pre-requisite for investments in the capital-intensive sector.

Photo: Ramesh Pathania / Mint

The legislation is crucial for the operationalization of the India-US civil nuclear agreement signed between the two countries in 2008 and to enable the US companies to do nuclear business with India. The Congress-led United Progressive Alliance (UPA) is keen to have it in place ahead of President Barack Obama’s visit due in the first week of November. It wishes to sign actual agreements with US firms during that visit.

“The government has tried to make the best of a bad deal. I think we need to be cautious, wait to see how the Bill is received by the suppliers. If the response is not good then the Parliament will have to reconsider the Bill," said Naresh Chandra, former Indian ambassador to the US.

But the passage of the Bill through the Lok Sabha came at a price.

The government accepted 18 amendments, including one that trebles the liability cap on an operator from Rs500 crore to Rs1,500 crore.

The Lower House cleared the Bill after science and technology minister Prithviraj Chavan dropped the word “intent" from the legislation. The proposal had limited the liability by wording it as “act of supplier or his employees done with the intent to cause nuclear damage", which meant that the government would have to prove motive.

The Bill will now be sent to the Rajya Sabha and once approved, will be forwarded to President Pratibha Patil for approval before becoming a law. The Bill was introduced in the Lower House in April during the Budget session and was sent to the parliamentary standing committee for scrutiny.

Rejecting the Opposition’s allegations that the Bill was aimed at benefiting US companies, Prime Minister Manmohan Singh said: “I categorically state that the Bill is a completion of a journey to end the nuclear apartheid which the world had imposed on India... To say that this has been brought to promote American interests, to promote American corporations, I think, this is far from the truth."

“Nuclear power is an option we should simply not ignore," Singh added, explaining that it was the most cost effective option to increase power generation capacity.

Supporting the Bill, Congress member of Parliament Manish Tewari said nuclear power was essential to achieve the targeted 9% growth in the gross domestic product. Almost 40% of Indian households are still without electricity and the government sees nuclear power as a viable option to meet the growing energy needs of the world’s second fastest growing major economy.

The main opposition party, the Bharatiya Janata Party (BJP), supported the Bill after the government agreed to enhance the compensation, but Jaswant Singh, the former foreign minister, politically attacked the UPA and said, “You should consider future generation(s) of India, not (the) President of the US... We are in a buyers’ market. We don’t have to follow the sellers’ instructions. They will have to sell it to us because there is no other market."

The five-hour debate over the Bill saw the Lower House rejecting by 252 to 25 an amendment sponsored by the Left parties, which would have specified unlimited compensation in the event of an accident.

Indian industry lobby groups on Tuesday demanded the government drop the clause, 17(b), that seeks to make suppliers liable to pay compensation in the event of a nuclear accident, saying that it would adversely affect the Indian companies in the nuclear power sector as “globally, there is no insurance coverage available for suppliers in the nuclear business".

According to an executive of an industry lobby, who did not want to be identified on account of the sensitivity of the matter, equipment suppliers to a nuclear plant are worried the final version of the Bill may discourage investment. Critical equipment for nuclear plants is expected to come from overseas companies, but many Indian firms hope to supply less critical equipment that goes into a nuclear plant. Some of these firms could even be state-owned ones.

“We are not taking a long-term view. We are assuming that all the operators will be Indian and all the suppliers will be foreign. As the market grows, Indian companies will be the suppliers, play a bigger role in the industry. If the compensation claims are high, it will be the consumer or the taxpayer who will have to pay," added former ambassador Chandra.

The open-ended nature would make equipment suppliers wary of investing or look for insurance, which would add significantly to the cost, the industry lobby executive said.

Apart from the US, India has signed civil nuclear cooperation agreements with Russia, France, Britain, Canada, Argentina, Kazakhstan, Mongolia and Namibia. Companies from Russia and France have already been awarded contracts for supplying nuclear reactors to India.

Sanjiv Shankaran and Elizabeth Roche of Mint and PTI contributed to this story.