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    South Asia
     Sep 2, 2010
Cracks in India's nuclear law
By Indrajit Basu

KOLKATA - Pleasing neither supporters nor its critics, India this week passed a Nuclear Liability Bill, opening up the country’s US$150 billion nuclear power market to global equipment suppliers. The first to benefit may be American companies like General Electric and Westinghouse Electric, followed by French and Russian nuclear power equipment suppliers.

Although the new bill paves the way for bringing India out of what Prime Minister Manmohan Singh describes as "nuclear apartheid", critics said it didn't do enough to address the safety concerns of its people.

For the time being, the bill may be a personal triumph for the prime minister. After signing the landmark 123 Agreement with


then United States President Gorge Bush in October 2008 to lift a three-decade long global embargo on the transfer of nuclear fuel and technology to India, Manmohan has fought many battles to bring the opposition over to letting foreign investors and suppliers enter the country's civilian nuclear programs.

"This bill is a completion of a journey to end the nuclear apartheid, which the world had imposed on India in the year 1974," Manmohan said on August 25 while announcing the legislation in parliament. With it, Manmohan has also managed to score a geopolitical brownie point by demonstrating his resolve to push through a controversial deal ahead of President Barack Obama's visit in November.

By opening up the power sector to nuclear power plants, energy deficits that have been a drag on the country’s economic growth for years could be narrow significantly. The bill also allows the India-US 123 Agreement to bear its first fruits as it paves the way for GE and Westinghouse to start work on building reactors in at least two sites identified for them. The two deals could be worth around $10 billion, according to reports.

Still, the price the country may end up paying for not being a nuclear outcast may be too high. "For one, there are enough loopholes in the bill that can entrap the operator [the power generator] into unlimited liabilities," said Lydia Powell, senior fellow at the New Delhi-based Observer Research Foundation, a think tank on public policy formulation. "Besides, the bill has identified the operator as the only source of liability, while others like equipment suppliers were not made responsible. And most importantly, the bill has failed to address the interests of the victims of a nuclear accident."

Others say the rules for liability claims and payments set down by the bill in the event of a nuclear accident are skewed heavily in favor of equipment suppliers who are liable only if ''the nuclear incident has resulted as a consequence of an act of supplier or his employee which includes supply of equipment or material with patent or latent defects or substandard services.''

Experts like Powell say that this clause essentially channels liability for accidents to door of the operators, giving them extremely limited rights of recourse against suppliers should an accident occur. It also sets aside ordinary tort law by disallowing fault-based claims by victims against operators or suppliers.

“By merely directing legal channeling of liability rather than to reflect economic channeling of liability, the bill has clearly focused the interests of the nuclear industry instead of the victims,” Powell said.

The bill has set a total liability for the operator at $320 million, while the government has taken another $220 million upon itself.

The new legislation ''leaves ample scope to channel liabilities to the suppliers,'' the Confederation of Indian Industry (CII) lobby group said, adding that the bill therefore adequately strengthens safety norms for the operation of nuclear plants.

India’s new nuclear liability laws are more comprehensive than most other nuclear powers, according to the CII. China, Canada, France, Germany, Japan, Russia, the UK and even the US all have similar laws that channel liability exclusively to operators and do not provide a right to recourse against suppliers, the confederation said. India and South Korea are the only countries that provide right to recourse against the supplier, although in South Korea the right to recourse can be excluded through a carefully crafted contract, the confederation said.

There are 19 nuclear power plants already operational in India and the sector is set to benefit from the 123 Agreement. With total capacity of 4.5 Giga Watts (4,500 MW), the plants have been hit by dwindling domestic uranium reserves and sanctions on fuel supplies. Nuclear power generation capacity is consequently down to 3% of total installed power generation capacity of the country. On the back of the agreement, India signed a $700 million deal with Russia in February last year for the supply of 2,000 tons of nuclear fuel.

Four more reactors under construction are expected to get cracking, providing hopes for India to eventually boost nuclear power generation to about 35 GW by 2020.

The a greater role for nuclear energy would help India achieve 9% GDP growth in the coming years, according to Citigroup analysts Rohini Malkani and Anushka Shah. The economy grew 8.8% from April to the end of June fiscal first, its best performance in two-and-a-half years, data released by the government's Central Statistical Organization showed yesterday.

According to Malkani and Shah, passage of the liability bill also heralds greater private sector participation. This will provide scope for several countries like France, United Kingdom, Canada, Namibia, Mongolia, Argentina and Kazakhstan to participate in India's still-nascent nuclear energy sector, they wrote in a note to clients. "Current targets allow sufficient space for both international and domestic companies to expand," they said.

The bill, passed by parliament on August 30, is a ''welcome development for not only the country but also the global nuclear community as a whole,'' according to the Observer Research Foundation's Powell.

Powell argues that the bill would have been ''flawless'' had it paid enough attention to the interests of the victims of nuclear accidents. ''The fear is, given the weak legal provision for the victims, the suppliers, who are usually a powerful group of people, could get away with next to nothing in India.''

Indrajit Basu is a Kolkata-based correspondent for Asia Times Online.

(All quotes above are exclusive to Asia Times Online).

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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