Last week, in Part 1 of this Special Report, we explored the history of India’s nuclear law liability regime and the passing of the 2010 Civil Liability for Nuclear Damage Act. We ended by highlighting how the 2010 Liability Act effectively drove a wedge between international suppliers and India’s nuclear industry by exposing suppliers to increased liability in the event of accidents.
Today, in Part 2, we will discuss and analyze the recent India-US agreement on nuclear trade and liability. In addition, we will canvas news reports and opinion pieces to get a sense of the reaction’s of industry experts and observers.
Part 2: The India-US Agreement
In January of this year, U.S. President Barack Obama visited India to meet with Prime Minister Narendra Modi. One of the key goals of the president’s trip was to formalize an agreement on nuclear development and liability issues.
(Image Source: Reuters via the BBC)
As a report by Dan Roberts in The Guardian notes, the threat of tough Indian compensation laws – specifically the 2010 Liability Act – had “frustrated US hopes of an export boom in the energy sector.” As of May 2015, the details of the deal are still being finalized. However, certain baseline elements are set. As this Reuters report lays out, the deal sets a framework for the US nuclear industry to enter commercial talks with India’s nuclear operators by resolving two concerns, inspections and liability.
On the issue of liability specifically, the agreement upholds the strict liability regime and the supplier liability provisions of the 2010 Liability Act. However, to address supplier concerns, India will establish an insurance pool to cover liability up to a hard cap. The insurance pool, which would be backed by the state of India, would cover operator liability of up to 15 billion rupees (around $250 million US). Any recourse sought by the operator against a supplier could not be exceed this figure. In addition, insurance premiums for suppliers would be a fraction of the amount paid by the operator of the plants.
The Reuters report also highlights that in the event of a large scale incident, the Indian government would cover additional costs up to $420 Million (US) and, for additional funds, the report says that India would need to join the IAEA Convention on Supplementary Compensation for Nuclear Damage (CSC).
Following the India-US agreement, India has made it clear that the 2010 Liability Act will not be amended. A report from the India Express highlights the government’s position that
the foreign suppliers of the reactors cannot be sued for the damages by victims of a nuclear accident but can be held liable by the operator who has the right of recourse that could be operationalised through the contract between the operator and the supplier.
As a result, the agreement should not be viewed as a reform of India’s liability laws, but as an agreement to work within those laws by establishing an insurance pool for the operators and suppliers. In retrospect, it is clear that it was very important that India maintain its liability regime, as public and political opinion favoured increased liability for foreign suppliers following the Bhopal disaster in 1984. The agreement thus establishes a mechanism that keeps this regime in place while allowing for increased international nuclear trade.
Reactions to the Agreement and Concluding Thoughts
Reactions to the agreement have been mixed in the ensuing days and months. Partly, this is due to the fact that many of the details of the insurance pool have yet to be finalized. In an interview with Germany’s Deutsche Welle (DW), Mycle Schneider, an independent international consultant on energy and nuclear policy, shared concerns about the deal;
apparently, no specific document was signed. The Indian government reportedly announced its plan to set up a 122 million USD insurance fund to cover operators and suppliers from liabilities in case of an accident. Senior US nuclear industry officials stated they need to understand the “fine print” of the insurance. Equipment suppliers are keeping the champagne on ice, as one Indian business journal commented.
Mr. Scheinder, when asked if he expects the Indian market to become more appealing for US companies, says that “there is no real market for foreign companies in India, unless they bring their own funding. Under free market condition, it is not possible anymore to build a nuclear power plant anywhere in the world.”
A recent article on Monday by Ran Chakrabarti, an Indian lawyer, echoes similar skepticism.
It remains to be seen whether the Act and the Rules set out a balanced framework, encouraging suppliers to dip their toes into the Indian nuclear energy market, yet protecting the legitimate interests and concerns of the public in the event of a nuclear accident.
Given the complexity of nuclear development and the liability regime in India, it’s clear that this agreement will not be a panacea for all of the industry’s problems. As we’ve seen in these criticisms, and throughout India’s history, the role of foreign companies and governments in trade and development has been at times troublesome and, at other times, even disastrous.
However, India is growing at incredible rates and, as we explored in Part 1, lacks access to domestic energy resources such as coal and oil (which have driven China’s much faster economic growth). As a result, nuclear energy can help provide for a better base capacity for the country as it continues to also develop renewables such as wind and solar. In Part 3, to be published in the coming weeks, we will explore the future of nuclear in India and also focus on the ongoing finalization of the US-India agreement.