Opinion – Did India get a fair “Nuclear Deal”?

Several years of deadlock was broken when India and USA had announced a “breakthrough” in the contentious provisions of Civil Liability for Nuclear Damages Act (CLNDA) during the recent Obama’s visit to India. Before venturing into the benefits of this deal, a quick look at these contentious provisions of the CLNDA.

  1. Section 17(b) of CLNDA
    • Section 17 of the act deals with the “Right to Recourse” of the operators against the suppliers.
    • Section 17(a) and 17(c) confers this right to the operators in cases of a deliberate act to cause nuclear damage by the supplier and as per the contract between the supplier and operator. They both are in consonance with International Convention on Supplementary Compensation (CSC) for Nuclear Damages. [India is a signatory, but hasn’t ratified the CSC yet].
    • Section 17(b) allows the operator to seek right to recourse against the supplier in cases of “patent or latent defects” or “substandard service” provided by the supplier. This is largely being criticised as against the CSC.
  2. Section 46 of CLNDA
    • This provision makes the operators (and not suppliers) liable to the tort laws or criminal proceedings against the supplier in case of a nuclear accident. This is also being criticised as not being in consonance with the CSC.

Under these contentious provisions of the CLNDA, the nuclear suppliers, both domestic and foreign, have been reluctant to enter into the nuclear market of India. As a result, it has become an impediment to India’s aspirations of developing clean nuclear energy.

To resolve this deadlock, India and USA had constituted a Indo-US joint Contact Group during Modi’s visit to USA in 2014. The current resolution was arrived only because of the efforts of this group.

The recently stuck deal between India and USA was being revealed by the government of India by bits and pieces. From whatever that has come in the newspapers so far, the deal meant the following:

  • Supplier liability will be taken care through the development of an “Insurance Pool” of worth ₹1,500 crores, of which 50% would be contributed by General Insurance and 4 other public insurance companies and the rest would be contributed by the government on a tapering basis.
  • This absolves the suppliers from any liability in case of nuclear accident except in cases where the contract between operator and supplier specifically says so.
  • Also the suppliers will not be subjected to tort laws or criminal proceedings as per the section 46 of the CLNDA.

This deal was largely welcomed by several other nations like France, which had expressed interest in supplying nuclear reactors (European Pressurised Reactors) to India – for example, the one proposed at Jaitapur.

Merits of the deal:

  • The deal would end the road block allowing India to embark on its aspirations of producing a nuclear energy of 63,000 MW by 2032. It would go a long way in meeting the energy needs of the country given that India has the world’s largest Thorium reserves. And ofcourse, not to forget its pro-stance on climate change mitigation.
  • This is in consonance with the CSC.
  • Strengthen India’s claim to the membership of NSG, which the USA had supported soon after the deal was signed.

Demerits of the deal:

  • The fundamental argument behind placing the liability on suppliers is not just to seek compensation in case of a nuclear accident but infact it is more about putting pressure on the suppliers to ensure supply of superior quality of nuclear reactors. Such a liability would prevent the suppliers from taking inappropriate design choices and uncalculated risks.
  • Seeking the liability out of Indian tax payers’ money is not fair when the suppliers provide any defective equipment.

In a desperate move to break the deadlock, India has stuck an unfair deal especially when the long shadow of the Bhopal gas tragedy of 1984, which took place due to defective equipment, still casts strongly on the country. What India could have done is quantifying the liability on the suppliers and placed a cap on it. That would have been a better solution.

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