Liability in case of mishap lies with nuke plant operator: govt
Operator can seek damages from suppliers or manufacturers if initial contract allows for it, says govt note
New Delhi: India on Sunday revealed the details of its talks with the US to operationalize their long-stalled civil nuclear cooperation pact, clarifying that liability in the case of a nuclear accident would rest primarily with the operator of nuclear power plants.
According to the details, contained in a press release put out by the ministry of external affairs, the operator of the nuclear plant can seek damages from the supplier or manufacturer of equipment if their initial contract allows for it.
The press release also underlines that there will be no amendments made to the Civil Liability for Nuclear Damage Act (CLNDA) passed by Parliament in 2010, making it clear that the existing law has been interpreted in a manner so as to ensure India and the US can engage in nuclear commerce, more than six years after signing the civil nuclear cooperation pact.
The clarifications are expected to provide relief to companies—both Indian and foreign—that were previously reluctant to enter the Indian nuclear power market, given that the CLNDA seemed to place the onus of liability in the event of an accident on the suppliers and manufacturers of equipment rather than on the operator. According to the website of the state-run Nuclear Power Corp. of India Ltd (NPCIL) which is the operator of nuclear power plants in India, the Indian government has a target of producing 63,000 megawatts (MW) of nuclear power by 2032.
“Reading the clarifications today, it seems clear it is the operator that bears the responsibility (in the event of any mishap),” said Rajeshwari Rajagopalan, an expert on nuclear issues at the Observer Research Foundation think tank in New Delhi.
Given that the Indian law will not be changed, said C.U. Bhaskar, director of the New Delhi-based think tank, Society for Policy Studies, Sunday’s disclosures were a “creative, innovative, forward-looking interpretation (of the law) to get suppliers and operators on the same side” to enable commercial movement on the India-US nuclear deal.
“It is now left to be seen how the commercial entities on the two sides take the deal forward,” he said, referring to US firms General Electric Co. and Westinghouse Electric Co. LLC who have been seeking to establish nuclear power plants in India and are awaiting the implementation of the deal.
Evidence of India and the US having reached some form of an understanding on civil nuclear cooperation came at a joint press conference in New Delhi addressed by Prime Minister Narendra Modi and US President Barack Obama on 25 January. While Obama said both sides “have achieved a breakthrough and are moving towards full implementation of the civil nuclear energy deal”, Modi said India and the US were “moving towards commercial cooperation.”
One of the first points clarified by the Indian government on Sunday was that “there is no proposal to amend the Act or the Rules” of the CLNDA.
Another key point made clear was that liability in the event of a nuclear accident is “strict” and “channelled to the operator through a no-fault liability regime”. In other words, the operator will bear the brunt of liability claims.
Operators have the option to act against a supplier if they find an intent to cause damage. But this option or “right to recourse” clause will have to be worked out as part of the contract between the operator and the supplier.
“In other words, it permits but does not require an operator to include in the contract or exercise a right of recourse,” the statement said, adding: “It is open for the operator and the supplier to agree on the terms of their contract.” And this, the Indian government has clarified, is compliant with the Vienna convention on supplementary compensation (CSC) that India signed in 2010.
Since there will be no amendment to CLNDA, any doubts that suppliers that include foreign firms would be exempt from liability have been set at rest.
But to reassure them, the press note has made important clarifications. These include the creation of an “India Nuclear Insurance Pool” to “facilitate negotiations between the operator and the supplier concerning a right of recourse by providing a source of funds through a market-based mechanism to compensate third parties for nuclear damage”.
“It would enable the suppliers to seek insurance to cover the risk of invocation of recourse against them,” the statement said, adding that this is a “risk transfer mechanism formed by GIC Re and four other public sector units who will together contribute a capacity of ₹ 750 crore out of a total of ₹ 1,500 crore. The balance capacity will be contributed by the government on a tapering basis. The pool will cover the risks of the liability of the nuclear operator...and of the suppliers.”
“The Pool envisages three types of policies, including a special suppliers’ contingency policy for suppliers...Operators and suppliers instead of seeing each other as litigating adversaries will see each other as partners managing a risk together. This is as important for Indian suppliers as it is for US or other suppliers,” the statement said.
The term “supplier” has also been defined in the clarifications put out by the ministry on Sunday. This was something not specified earlier in the CLNDA, making it seem as if only foreign companies were referred to. Sunday’s statement clarifies that Indian companies also came into the definition of suppliers if they provide design and specification to vendors.
“The keenness of the two leaders (Modi and Obama) to get this going seems to have been the driving force” in arriving at an understanding, said Rajagopalan.
“Modi clearly directed the bureaucrats to find a way to get the deal going,” she said.
Opposition to the deal arose in the context of the Bhopal gas disaster—what is thought to be the world’s worst industrial accident when lethal methyl isocyanate gas leaked from a chemical plant owned by then US company Union Carbide in Bhopal in 1884. The gas killed many thousands of people and maimed thousands of others. However, the owners of the plant were thought to have been let off easily as India did not have an industrial liability Act. This prompted lawmakers to push for stringent clauses in CLNDA.
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First Published:8 Feb 2015, 08:03 PM IST
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