Indian Nuclear Liability: No Concern for Global Suppliers!
Advancing global collaborations is need of hours for reliable clean energy transition, Nuclear is the clear answer for emerging country such as India that aspires to develop and decarbonize simultaneously.
Huge market and business potential exists for the nuclear companies from advanced countries. But, there are certain inhibitions and hesitations of global suppliers to do business in India, particularly arising out of liability issues. But is liability really a concern for suppliers or a roadblock for them.
It’s quite pertinent to understand, demystify and debunk the liability doubts to give way for advancing business collaboration in the Indian market.
NBP recently had a conversation with from Mr. Padmakumar Nair from the Department of Atomic Energy on the issue of Indian nuclear liability.
Top 15 issues for International Suppliers to Note:
India will be the third largest economy within next 4-5 years’ time period i.e. before 2027. Further, India aspires to be a developed country by 2047 and to be a net zero country by 2070. Thus, there is huge demand rising for the clean energy in the country.
To meet its developmental and decarbonization objectives, India, as per the VIF-IIT model, will have a clean energy demand of 24470 TWh (which is way higher to the current energy consumption of 6292 TWh) . For practical reasons and geopolitical issues, renewable dominated energy transition will not be adequate to meet this huge demand cost-effectively and sustainably. Thus a major portion of it will be met by nuclear.
For the kind of nuclear scale-up that India is looking for, it’s a big opportunity for global nuclear companies to enter and expand their businesses in the Indian nuclear market. But, there are certain market challenges also, particularly arising out of the nuclear liability issues.
Indian nuclear liability act (CLND) came into being in 2010 and rules were formulated in 2011. There have been certain apprehensions by Indian industry and global suppliers and doubts regarding the suppliers liability clause 17 and its implementability.
The two major government nuclear organizations DAE and NPCIL have refuted that these are any novel provisions but are as usual as any other provision for product liability. Governments of India’s Ministry of External Affairs (MEA) and the Department of Atomic Energy (DAE) have published comprehensive response on FAQs relating to nuclear liability to dissuade any doubt in the minds of global or Indian suppliers.
FAQs are based on parliamentary deliberations. It puts these interpretations on a strong legal footing with the considerations that basic premise will be respected if issues escalate to the court of law.
As a part of risk management strategy, India has instituted insurance mechanism by having a dedicated Indian Nuclear Insurance Pool (INIP) of INR 15 billion capacity, which is administered by India’s government sector reinsurance company GIC Re.
Operator (NPCIL) is taking operator’s policy from the INIP. So, in case of any compensation equirement for victims of any nuclear disaster in future, the compensation will go from the Insurance pool and not from NPCIL’s company funds.
For PHWR stream operator NPCIL, being system designer, is itself taking the responsibility as supplier on behalf of all Indian and global suppliers/sub-suppliers.
For international reactor setting up in India, India has clarified its position through the MEA and the DAE by releasing comprehensive response to FAQs on nuclear liability. With nuclear insurance pool in place, there is hardly any concern now.
For imported reactors (EPR-1650, AP1000 or any other), NPCIL has held very fruitful discussions with reactor technology providers to avail the suppliers insurance policy for which premium amount is quite miniscule (0.1-0.2% of the total project cost) and further waive off its suppliers/sub-suppliers taking part in the program. Such reactor technology providers can pass on this cost to NPCIL by building this insurance premium cost in their final project cost schedule.
To cover the suppliers/ sub-suppliers under insurance coverage, operator /main-supplier would declare to the Insurance pool the name of suppliers/sub-suppliers involved in any project/program. The premium would be decided accordingly by the insurance pool.
For operator, the liability is channeled on no-fault basis to promptly compensate the victims in case of any nuclear disaster. Since operator has taken insurance policy, operator’s right is subrogated to the insurance pool. Operator and suppliers policy issued by INIP covers only the compensation made to the third party and not to the damage caused to the nuclear installations.
The provisions under the act are enabling provisions only and not mandatory ones. The interpretation of the rules under this act imply that operationalization part of any supplier liability will be accomplished through the contractual arrangement between NPCIL and the suppliers themselves. In line with it, since NPCIL has the option and right to waive off any supplier from any liability, modalities can be decided and agreed upon the parties concerned in their contractual conditions.
For any supplier/sub-supplier, the contact value or operator liability whichever is lesser will be its liability. And this liability remains for a period of initial licensing period or product liability whichever is longer (generally upto 7-8 years). After the lapse of this period, the suppliers liability goes away. The inference to product liability in the act and the rules is equally valid for clause 17(a) and 17(b).
India Nuclear Business Platform 2023
The 4th edition of India Nuclear Business Platform (INBP) will take place in Mumbai this 10-11 October. This industry meeting will feature all they officials and players across the Indian nuclear supply chain. Official event partners of this meeting are India’s Department of Atomic Energy and NTPC. More information on this meeting is available here.
