Context

• The Union Budget for FY 2024-25 included a proposal for partnerships with the private sector to research and develop Bharat Small Reactors (BSR), Bharat Small Modular Reactors (BSMR), and other nuclear energy technologies.
• This move is aligned with India’s broader goal of generating 500 Gigawatts of non-fossil fuel energy by 2030, as pledged at the COP26 Summit in 2021.
• However, this ambitious plan faces numerous legal, regulatory, and financial hurdles that must be addressed for the successful involvement of private entities in the nuclear sector.

Existing Legal Framework Governing the Nuclear Sector and SC’s Judgement on Private Sector Participation

• Existing Legal Framework
  • India’s nuclear energy sector operates under a stringent regulatory framework, primarily governed by the Atomic Energy Act, 1962 (AEA).
  • The AEA grants exclusive control over nuclear energy activities to the central government, which executes these through designated authorities or companies, such as the Department of Atomic Energy (DAE) and the Nuclear Power Corporation of India Limited (NPCIL).
  • This centralised control has historically limited private sector involvement to specific roles, primarily in engineering, procurement, and construction (EPC) services, while excluding private entities from core activities like research and development (R&D).
• SC’s Decision on Private Sector Participation
  • In a significant legal development, the Supreme Court of India recently upheld the provisions of the AEA in the case Sandeep T.S. vs Union of India (September 2024).
  • The judgement dismissed a petition challenging the law’s restrictions on private sector participation in nuclear power licensing.
  • The Court emphasised the importance of stringent safeguards due to the potential risks associated with atomic energy.
  • This ruling reinforces the central government's dominance over nuclear energy activities, which complicates efforts to introduce private players in a meaningful capacity.

The Current Role of Private Sector, Need for Private Sector Participation, and the Government’s Proposal

• The Current Role of the Private Sector
  • Currently, private companies such as Megha Engineering & Infrastructures and Reliance are involved in nuclear energy projects, but only in non-core areas, primarily through EPC contracts.
  • These companies build and maintain the physical infrastructure of nuclear plants, but they are restricted from engaging in activities related to nuclear material management or operations that involve handling radioactive substances.
• Need for Private Sector Participation: Capital Investment
  • The nuclear sector is highly capital-intensive, and the scale of investment required for further expansion, especially with advanced technologies like BSR and BSMR, is enormous.
  • The NITI Aayog has estimated that nearly $26 billion of private investment will be needed to develop the nuclear sector to meet India’s energy goals.
  • Given the financial burden on the government, involving private firms in more substantial roles could provide the necessary capital, technical expertise, and innovation.
  • However, such participation is currently prohibited under Section 3(a) of the AEA, which bars private companies from producing or utilizing atomic energy, keeping R&D activities strictly under government control.
• The Government’s Proposal
  • The government’s proposal to invite private participation in nuclear R&D, as announced in the Union Budget 2024-25, therefore, clashes with the prevailing legal restrictions.
  • While the announcement signals a policy shift, any real progress would require substantial amendments to the AEA or the creation of a legal framework.
  • The new provisions should balance the involvement of private entities with government oversight to mitigate risks related to nuclear safety, security, and liability.

Legal Challenges Surrounding Private Sector Participation in India’s Nuclear Energy

• Strict Provisions of Atomic Energy Act
  • One of the primary legal hurdles for private sector involvement is the rigidity of the AEA, which monopolises control of nuclear activities under the government.
  • This legal structure ensures that only government-owned or controlled entities, such as the NPCIL and the DAE, manage nuclear energy production.
  • While this structure has maintained a high level of safety and security, it significantly hampers the ability to leverage private sector efficiency, innovation, and investment.
• Legal Environment Around Nuclear Safety and Liability
  • The Civil Liability for Nuclear Damage Act (CLNDA) of 2010 is a central piece of legislation designed to provide prompt compensation for victims of nuclear incidents and to impose liability on the operator (usually the NPCIL).
  • The CLNDA enforces a no-fault liability regime on nuclear operators, meaning that the operator is liable for damages irrespective of fault.
  • This provision, while intended to protect public safety, also disincentivises private participation because private entities would likely hesitate to invest in an industry where they may bear enormous liability in case of an accident.
• Complex Regulatory Framework and Lack of Transparency
  • The Atomic Energy Regulatory Board (AERB), established to monitor radiation safety and regulate nuclear technology, has faced criticism for lacking independence from the government.
  • The AERB’s perceived lack of autonomy could hinder private investment, as companies may seek more transparent and impartial regulatory oversight before committing to such a high-risk industry.
  • The Nuclear Safety Regulatory Authority (NSRA) Bill of 2011, which aimed to establish an independent nuclear safety body, has yet to be enacted, leaving unresolved concerns about regulatory transparency and effectiveness.

The Path Forward for Private Sector Participation in India’s Nuclear Energy

• Public-Private Partnership (PPP)
  • A key legal avenue that could bridge the gap between current regulations and private sector involvement is the creation of PPP in the nuclear energy sector.
  • In a PPP structure, the government could retain a majority stake, 51% or more, in nuclear projects, ensuring that control and accountability remain with the state while allowing private companies to contribute capital and technical know-how.
  • This approach would align with Section 3(a) of the AEA, which limits the involvement of private players, while still leveraging private sector resources for the development of newer nuclear technologies such as SMRs and modular reactors.
  • Moreover, under a PPP structure, projects would be subject to the Right to Information (RTI) Act, promoting transparency and public accountability.
  • By holding the majority stake, the government would remain responsible for critical decisions and the safety of the reactors, while private entities would be involved in more specialised roles such as technology development, innovation, and infrastructure creation.
• Need for Regulatory Reform
  • For private investment to materialise, regulatory reform is essential.
  • The role of the AERB, for instance, must be reevaluated to ensure that it functions with greater independence and impartiality.
  • Investors will only feel confident entering the nuclear sector if they are assured that safety regulations are enforced by an autonomous and technically competent regulatory body.
• Resolution of Pending Litigation Regarding the CLNDA
  • The ambiguity surrounding nuclear liability creates a significant obstacle to private sector involvement.
  • A clear and stable legal environment, where liability is well-defined and manageable, will encourage private entities to participate more actively.
  • This could potentially be achieved through amendments to the CLNDA that clarify the extent of operator liability, as well as government-backed insurance schemes to cover catastrophic incidents, thereby sharing the burden of liability between the state and private players.

Conclusion

• India’s nuclear energy ambitions are both admirable and challenging.
• The introduction of private sector participation, especially in the context of BSRs and BSMRs, could provide the financial and technological boost necessary to achieve the country’s decarbonization goals.
• However, this shift must be accompanied by comprehensive legislative and regulatory reforms, particularly in areas such as liability, safety, and transparency.