India’s Nuclear Power Plant Tenders Aim to Ease Liability Fears

  • Bids sought from local manufacturers for plant in Haryana
  • New tender addresses concerns over liablility law: NPC

India’s monopoly nuclear power producer is again seeking bids for a new project, this time reissuing tenders that aim to ease concern over a liability law that has so far deterred potential developers.

State-run Nuclear Power Corp. of India Ltd. has sought bids from domestic equipment manufacturers to build a 1,400 megawatt power plant at Gorakhpur in the northern state of Haryana, two tenders posted on the company’s website showed. It would be the first nuclear power project that would be subject to the Civil Liability for Nuclear Damage Act, which was passed in 2010 and exposes suppliers to claims in the event of an accident.

In its latest tender, Nuclear Power has adopted the definition of suppliers laid down in a 2011 addendum to the nuclear liability law, according to S.K. Mazumder, executive director for contracts and materials management at Mumbai-based Nuclear Power. The tender will also follow the clarifications issued last year by the foreign affairs ministry to address some of the other concerns of equipment makers, he said.

“We have gone the extra mile to address the concerns of equipment suppliers,” Mazumder said in a phone interview. “We now expect good support and understanding from our suppliers. We don’t want to lose any more time to take the nuclear program forward.”

Convincing Suppliers

India’s plans to ramp up its nuclear generation capacity 10-fold by 2032 have been hampered by suppliers’ concerns over the nuclear liability law. The worries halted not only the larger projects to be built with foreign collaboration, but also the smaller indigenous ones, as local equipment makers joined the campaign to demand a change in the controversial provisions of the law. 

Since the enactment, the country has taken steps to convince suppliers that its law adheres to international standards, including its ratification earlier this year to the Convention on Supplementary Compensation for Nuclear Damage, also known as the CSC.

About a year after the controversial law was enacted, India published an addendum to the law that defined suppliers as those who design and build a system or an equipment, and provide quality assurance for the parts. The rules helped remove many local equipment makers from the definition of a supplier. 

Mumbai-based Nuclear Power last sought bids from local equipment manufacturers for the project almost two years ago. But few component makers bid for the project then, as they felt the contract didn’t provide enough safeguards against the liability law, according to Y.S. Trivedi, senior vice-president for heavy engineering at Larsen & Toubro Ltd.

Insurance Pool

Mazumder also said the contract advises suppliers to join a 15 billion-rupee insurance pool to cover their risk.

The Indian law caps the operator’s liability at 15 billion rupees and asks the federal government to take“additional measures” in case claims exceed that amount. The claims made on a supplier are also capped at 15 billion rupees.

Construction on the Haryana project is expected to start in about six months and it will take about five years after that to build the plant, Mazumder said. The plant will have two domestically designed pressurized heavy-water reactors of 700 megawatts each in the first phase. The company will be issuing more tenders to buy equipment for the project, Mazumder said.

Clearer Definitions

“The tenders have been issued with specific reference to the liability rules, which define suppliers and vendors,” L&T’s Trivedi said in a phone interview. “The suppliers’ insurance mechanism mitigates the balance risk. This is the way forward.” L&T, one of India’s biggest equipment makers, is considering bidding for the contract, Trivedi said.

India’s Atomic energy secretary Sekhar Basu in November said Nuclear Power will introduce clauses in tender documents that will exclude component manufacturers for domestic projects from liability provisions. These companies can’t be termed as suppliers as they work under “our supervision and according to our design specifications, right from design to construction and fabrication,” Basu had said at a nuclear-power seminar in New Delhi.

“The tender document hasn’t been so explicit in sparing the domestic manufacturers, but it is certainly a more improved document,” said G.K. Pillai, managing director at Walchandnagar Industries Ltd., a component supplier for nuclear plants.

The law holds Nuclear Power liable in case of an accident, but gives it a right to seek damages from suppliers if it is established that the accident happened because of faulty equipment.

“With the elaborate explanations available to them, we hope the suppliers would be able to interpret whether they fit the definition of a supplier,” Mazumder said. “If they do, they have the insurance policy to cover their risk. If they don’t fit into the definition, they need not worry.”

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