Why in the News?

• The SHANTI Act, recently passed in Parliament, has opened India’s nuclear power sector to private players and significantly altered the nuclear liability framework.

What’s in Today’s Article?

• Nuclear Liability (Background, Statistics, etc.)
• SHANTI Act (Key Features, Liability Cap Comparison, Safety Concerns, Implications, etc.)

Background of Nuclear Liability in India

• India’s nuclear liability regime was primarily governed by the Civil Liability for Nuclear Damage Act (CLNDA), 2010.
• The Act was enacted after India signed the Convention on Supplementary Compensation (CSC) for Nuclear Damage.
• Its key objective was to ensure prompt compensation to victims in case of a nuclear accident while also holding responsible parties accountable.
• A distinctive feature of India’s framework was the “right of recourse”, which allowed the nuclear operator to seek compensation from suppliers if an accident occurred due to defective equipment or services.
• Additionally, Section 46 of the CLNDA permitted victims to pursue remedies under other laws, including criminal law.
• This structure was seen as strengthening accountability but was criticised by international suppliers who feared unlimited liability exposure.
• Nuclear energy currently contributes only around 3% of India’s electricity generation.
• Despite ambitious targets, 10 GW by 2000 and 20 GW by 2020, actual capacity reached only 2.86 GW in 2000 and 6.78 GW in 2020.
• High capital costs, safety concerns, and liability issues have been key constraints.

Key Features of the SHANTI Act

• Opening the Sector to Private Entities
  • The Act allows private companies to operate nuclear power plants, ending the Union government’s exclusive control over the sector.
  • This marks a structural shift in India’s atomic energy governance model.
• Supplier Indemnity and Removal of Right of Recourse
  • The Act channels liability entirely to the operator and removes the operator’s “right of recourse” against suppliers.
  • This means suppliers cannot be sued for defects in equipment, even if such defects contribute to an accident.
• Liability Caps and Changes to CLNDA
  • The operator’s liability is capped between Rs. 100 crore (for small plants) and Rs. 3,000 crore (for large plants).
  • The total liability for a nuclear accident, including the Centre’s contribution, is capped at 300 million Special Drawing Rights (approximately Rs. 3,900 crore).
  • The Act also omits Clause 46 of the CLNDA, thereby limiting victims’ ability to seek remedies under other laws.
  • Additionally, it provides a legislative framework for the Atomic Energy Regulatory Board (AERB), but its independence is limited as members are selected by a committee constituted by the Atomic Energy Commission.

Rationale Behind Supplier Indemnity

• Major nuclear accidents such as Three Mile Island (1979), Chornobyl (1986), and Fukushima (2011) involved design flaws and equipment vulnerabilities.
• Reports highlighted issues such as reactor design weaknesses, deficient emergency systems, and communication failures by suppliers.
• Despite this historical evidence, multinational suppliers, particularly from the U.S., have consistently argued that India’s liability framework discouraged investment.
• International nuclear liability conventions generally channel liability exclusively to operators and shield suppliers.
• The SHANTI Act aligns India’s domestic framework with these international norms by indemnifying suppliers from civil and criminal consequences.

Comparison of Liability Caps with Potential Damages

• The liability caps under the SHANTI Act are significantly lower than the economic costs of past nuclear disasters.

• The Fukushima accident’s total cost has been estimated at around Rs. 46 lakh crore.
• Belarus alone estimated losses from Chornobyl at approximately Rs. 21 lakh crore.

• In contrast, India’s total liability cap of around Rs. 3,900 crore is nearly a thousand times smaller than these figures.
• Even with additional funds from the CSC mechanism, compensation would likely cover only a fraction of actual damages in the event of a major disaster.
• This raises concerns that victims may bear a substantial share of losses beyond the statutory cap.

Safety and Moral Hazard Concerns

• The Act introduces the concept of indemnifying operators for accidents caused by “grave natural disasters.”
• This departs from India’s earlier “absolute liability” principle for hazardous industries.
• Such liability caps and indemnities may create a moral hazard. When operators and suppliers are insulated from full financial consequences, they may have weaker incentives to invest in maximum safety and resilience measures.
• Given that Fukushima was triggered by a tsunami, critics argue that natural disasters cannot be treated as unforeseeable risks in nuclear plant design.

Economic and Strategic Implications

• Despite contributing only a small share of electricity, nuclear energy projects involve enormous capital investments.
• For example, two Westinghouse AP1000 reactors in the U.S. cost about $18 billion each.
• The SHANTI Act potentially facilitates greater private and foreign participation in India’s nuclear sector, including plans for 100 GW capacity by 2047. However, small modular reactors, often presented as the future of nuclear energy, remain largely untested and may have higher per-unit capital costs.
• Thus, while the Act may unlock commercial opportunities and attract foreign suppliers, it simultaneously raises questions about regulatory independence, financial risk distribution, and long-term energy viability.