Do nothing about the nuclear liability law

Arguably, there are several options available to policymakers when it comes to the Civil Liability for Nuclear Damage Act, 2010 (“Liability Act”). One of them, is to continue with status quo or the do-nothing option. There is no doubt that a decision is necessary on this front, either way. For instance, as Prime Minister Narendra Modi begins his visit to the US, some commentators believe that lack of progress on this front will “haunt” him during the visit.

It is interesting to note, that in recent times, agreements involving nuclear fuel have been cited as indicators of movement towards the resolution of this problem. It is unclear why this is the case, considering the scope of the Liability Act. Arrangements for nuclear fuel, unless tied together with supply of nuclear plants, are largely disconnected from the issue of nuclear liability bothering foreign companies looking for an entry into India. From all accounts, the problems connected to the Liability Act remain a concern for foreign companies.

It is difficult to find an indication that Indian policymakers are considering a radical shift in stance. When faced with public protests in light of reports that India was willing to dilute the requirements under existing law, the previous government was quick to clarify that no such proposal was on the cards. While the current government has shown commitment towards making India a business-friendly destination, there have been no indications that it plans to radically change existing law either. Leading policymakers in the previous government made it clear that there were no plans to diluting the liability clause under the Liability Act.

It is in this context that we must consider status quo or the ‘do-nothing’ option. Considering the potential in the Indian market, it is possible that foreign companies might blink first. For instance, the Russians seem to have found a way out in the short term. First, as discussed elsewhere, it is possible that new units may be “grandfathered” under old contracts. Second, working with Indian insurance companies to offset the risk is also another option before the companies. Whether or not this option is better than the others available to policymakers is another question. Additionally, it can also be argued that keeping foreign players out in this way may help develop India’s indigenous nuclear programme. Given the Modi government’s push in favour of indigenization in the defence sector, it is not impossible that such a move may be packaged similarly in case of the nuclear power sector, especially considering the fact that the Indian programme is based on use of thorium (relatively, an abundant resource in India). While it may seem like this approach has not worked till now, this is, by no means, an option not worthy of your attention.

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