Is PM cementing his nuclear legacy by bypassing India's liability law?

Prime Minister Manmohan Singh may have braved a trial by fire in 2008 in getting the US Civil Nuclear Deal passed by Parliament, only to see its implementation stalled by a liability law that has kept all major nuclear power companies from entering India. But that may be set to change with the government making a last ditch attempt to revive the deal before the Prime Minister’s upcoming visit to the US on 27 September. The clauses of the Civil Liability for Nuclear Damage Act have widely been credited for stalling the implementation of the civil nuclear deal between India and the US, with power companies such as General Electric and Westinghouse unwilling to set up plants until certain clauses are amended. A particular clause the the companies have been keen to avoid is Section 17 of the Civil Liability for Nuclear Damage Act which says that in the event of damage caused by a plant, the operator of the plant can seek damages from the provider of equipment. The law states that damages can be claimed if: - the contract between the Indian company that runs the plant and the provider of the equipment explicitly states the liability - the accident takes place due to an act of a supplier or his employee or if there is a problem in the equipment provided - if there is some data provided or omitted with the intent to cause nuclear damage However, the Hindu in an exclusive report today says that when asked for his opinion on the clause Attorney General Goolam Vahanvati has said that it is for the operator of the plant to decide whether it should seek damages from the provider of equipment. [caption id=“attachment_1119893” align=“alignleft” width=“380”] Is the Prime Minister giving the US President a reason to smile. AP[/caption] In a response to a reference made to him by the Department of Atomic Energy, which is responsible for the setting up of nuclear plants, Vahanvati is quoted by the report as saying: “Section 17(a) provides for recourse if such right is expressly provided for in a contract in writing. If the operator chooses not to incorporate such a provision in the contract, it would be open for him to do so.” The Attorney General’s view came in response to a query from the DAE, which sought to know whether it had to include a clause in a contract with a company or whether it could limit the liability of the supplier in the event of an accident. The interpretation of the law could allow Nuclear Power Corporation of India Limited (NPCIL), the sole operator of nuclear power plants in the country, to limit the liability of providers of equipment. This is something that US companies could perhaps find acceptable. The interpretation comes even as a Telegraph report states that NPCIL and Westinghouse are set to ink a deal during the PM’s visit that will clear the setting up of six nuclear reactors in two villages in the Bhavnagar area of Gujarat, despite local residents protesting against it. However, while the residents of the two villages in Bhavnagar may be protesting, the state government has shown no opposition to the plan and is even expected to assist in land acquisition. While an NDTV report says that Vahanvati’s opinion may not be accepted, Times Now reported that in a note prepared for the Cabinet Committee on Security (CCS), DAE Chief RK Sinha is pushing for the Government of India to approve funding of the preliminary contract for the deal to go through. Times Now quoted the note as saying that since the approval of the Atomic Energy Commission cannot be sought due to a lack of time, Sinha approached the CCS seeking approval to begin the process for setting up the plants in Gujarat. After controversy over the articles, Minister for External Affairs Salman Khurshid has said that the existing nuclear liability act won’t be diluted in any way. “The position that we have taken in Parliament, there is no retreating from it,” Khurshid was quoted as telling ANI. While the deal hasn’t been signed between the two companies yet, is it a wise move to dilute a law that deals with the compensation of victims of a potential nuclear disaster? [caption id=“attachment_1119895” align=“alignright” width=“380”] Will this mean more nuclear power plants? Getty Images[/caption] In a detailed analysis for the Institute for Defence Studies and Anlyses in 2010, G Balachandran had noted that the Indian law, while contrary to some liability laws worldwide, wasn’t entirely unique and countries like South Korea had a similar law in place. In conclusion he noted: If it is felt that India’s long term energy security will need substantial reliance on nuclear power, and that such plans will be realized in a shorter period with imports of reactors and equipment, then any Indian bill, that goes beyond the norms on international conventions in assigning supplier liability will result in denial of reactors and nuclear equipments by foreign suppliers and hence will be counter productive. This is an absolute bottom line condition as of today. If in future, India as a major nuclear supplier can influence changes in this, well and good. Today, it cannot do so. Hence changes in supplier liability need to be carefully drafted. The current Sec. 17 formulation is good and should be retained. Unfortunately between 2010 and today, India’s nuclear power industry has largely remained the same with little growth in the sector despite the civil nuclear deal with the US. Whether it’s wise to bypass the law merely to make a diplomatic visit count, is questionable. As Firstpost had documented earlier, the Prime Minister’s upcoming trip to the US was expected to be a lacklustre one. However, with a last thrust at pushing through some mega deals in the nuclear sector before his term comes to an end, Manmohan Singh may be able to cement this as a part of his legacy. While he may be toasted in the US if he pulls this off, the Prime Minister may not have the most pleasant reception waiting for him upon his return.