Photographer: Adeel Halim/Bloomberg

Nuclear Liability Concern Lingers Despite India Signing Treaty

  • Nuclear accident law stymies plans to boost capacity 10-fold
  • U.S. nuclear companies seen in `wait and see' position

The world’s biggest nuclear technology suppliers may need more convincing that India’s liability law won’t leave them responsible for accidents.

The nation earlier this month ratified an international treaty on nuclear liability, which it said “marks a conclusive step” in addressing concerns about its legislation. Westinghouse Electric Co. said India’s law still leaves technology suppliers liable for accidents, while Electricite de France SA said it’s awaiting more information from the government.

International equipment makers have been hesitant to move forward with projects, complicating Prime Minister Narendra Modi’s efforts to bring reliable electricity to the entire population of a country that suffered the world’s worst blackout in 2012.

QuickTake India's Aspirations

“Fundamentally, it’s a business decision that has to do with risk,” said Mark Hibbs, a senior associate at the Nuclear Policy Program at the Carnegie Endowment for International Peace. “There’s a continued debate as to whether Indian law would be suspended in the case of a serious accident.”

The country’s Civil Liability for Nuclear Damage Act is a legacy of one of the world’s worst industrial accidents -- the 1984 Union Carbide chemical accident in the central Indian city of Bhopal that killed more than 10,000 people. Since its enactment in 2010, the country has taken steps to convince foreign suppliers that its law adhere to international standard, including its ratification earlier this month of the Convention on Supplementary Compensation for Nuclear Damage, also known as the CSC.

‘Wait and See’

Sekhar Basu, secretary at India’s Department of Atomic Energy, said last week that there’s no proposal to change the current law.

“The real issue is whether India’s patchwork proposals will enable Indian and foreign industry partners to do business in India’s nuclear energy sector,” Ted Jones, director of supplier programs at the Nuclear Energy Institute, a Washington-based industry group, said by e-mail. U.S. suppliers are eager to share technology “but with substantial contracts yet to be concluded, they clearly remain in a ‘wait and see’ position on the liability issue.”

Westinghouse, owned by Japan’s Toshiba Corp., has said it aims to reach a deal with India by the end of this year to provide at least six nuclear reactors.

“India’s current domestic nuclear liability laws still allow electric companies to obtain reimbursement against suppliers of nuclear power plants in the event of an accident,” Toshiba spokeswoman Yuu Takase said by e-mail. “Westinghouse will continue to work with India in order to address the issue.”

An Indian diner waits for his meal in candle light at a hotel during a power cut in Siliguri in July 2012.
An Indian diner waits for his meal in candle light at a hotel during a power cut in Siliguri in July 2012.
Photographer: Diptendu Dutta/AFP via Getty Images

‘Fundamental Incompatibility’

France’s Areva SA signed an accord in 2009 to supply six 1,650-megawatt reactors at Jaitapur, on the west coast of India. The company’s nuclear reactor business is being bought by EDF, which will take on the projects in India. “We look forward to getting more information and working with the Indian government to ensure the overall framework will be balanced,” EDF said in an e-mail.

“The sustainable solution to concerns about India’s existing domestic nuclear liability law is one that brings India into compliance with the International Convention on Supplementary Compensation,” Jonathan Allen, a spokesman for GE Hitachi Nuclear Energy, said by e-mail after India ratified the convention.

India plans to expand its nuclear generation capacity to 10 gigawatts by 2019 from 5.8 gigawatts this year. The nation aims to expand capacity to 14.6 GW by 2022 and 63 GW by 2032, according to the World Nuclear Association, which has said there is a “fundamental incompatibility” between India’s liability law and international conventions.

Court Risk

One potential workaround is to sign contracts with India’s state-owned Nuclear Power Corp. of India that specify suppliers aren’t liable in the case of an accident, though such stipulations may not hold up in court, according to M. V. Ramana, a professor at Princeton University’s Nuclear Futures Laboratory.

“The issue is not whether it is politically possible to make exceptions” in the contracts, Ramana said by e-mail. “But whether, in the event of an accident, such exceptions will hold up in an Indian court. It is possible that the court will rule the exception as illegal and hold the company liable.”

India has agreed with Russia to eventually install 12 reactors, with the first in operation in the southern town of Kudankulam and the second expected to start generation soon. The contracts for the first two reactors excluded supplier liability, according to the WNA. The countries reaffirmed their plans in December when Modi met with Russian President Vladimir Putin.

Russia and its national nuclear company, OAO Rosatom, is less vulnerable to liability issues as its reactor supply chain is mostly within the country, compared with other companies that have international suppliers, according to Hibbs. Rosatom is also “essentially an extended arm of the Russian ministry of nuclear energy,” he said. Rosatom didn’t reply to two e-mails seeking comment.

Russia “has been in business in India for a long time, they know the territory, they’re much more comfortable with the Indian situation legally,” Hibbs said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE