Updated – February 13, 2025 12:52 am IST
In the Union Budget speech on February 1, the Finance Minister Nirmala Sitharaman
announced the government’s intention to take up “amendments to the Atomic Energy Act
and the Civil Liability for Nuclear Damage Act…” This announcement is likely to please Washington, where successive administrations have been unhappy that the law places some minimal responsibilities on nuclear manufacturers in the event of an accident. But, in India, any move to indemnify suppliers should be a matter of serious concern since this could undermine nuclear safety.
Moreover, the reactors that the American government is pushing India to buy are
extremely expensive and their import makes no sense on economic grounds.
Any nuclear reactor carries the risk of accidents — some of which, such as the multiple
reactor meltdowns at Fukushima, Japan, in 2011, can be catastrophic. Such a disaster
affects three parties: the victims, the operator of the nuclear plant (which, in India, is likely
to be the public sector company, Nuclear Power Corporation of India Limited or NPCIL)
and its supplier, which might be a large multinational corporation.
Following the Bhopal gas disaster (1984) the Supreme Court of India ruled, in 1986, in the
Delhi Oleum gas leak case, that any enterprise engaged in a hazardous activity is
“absolutely liable” for harm suffered by the victims. However, in 2010, the United
Progressive Alliance (UPA) government created a special law for nuclear accidents that
diluted this principle. Under this law, primary liability is channelled to the operator and
capped at ?1,500 crore.
This is unfair to victims because the economic damage caused by an accident can be much
higher. The Japan Center for Economic Research estimated that the eventual cleanup costs
of the Fukushima disaster could range from ¥35 trillion to ¥80 trillion (or ?20 lakh crore to
?46 lakh crore) — more than a thousand times the cap on operator liability in the Indian
law.
Assigning responsibility
Despite this gross mismatch, the law did have one slightly redeeming feature. Under
pressure from civil society groups and the political opposition, the UPA government was
forced to include a clause called the “right of recourse”. This allows the operator to recoup compensation paid to victims from the supplier if the accident was caused by “supply of
equipment … with patent or latent defects or sub-standard services”.
Because of the historical monopoly enjoyed by U.S. nuclear companies, liability laws in
many other countries lack this feature. Instead, they completely indemnify suppliers. This
simply reflects the influence of powerful corporations and is not based on a scientific
analysis of previous accidents. In fact, design defects have played a role in every major
accident to date. A weakness in the Mark 1 containment used in the reactors at Fukushima
contributed to that accident. This defect was flagged as early as 1972, when a U.S. Atomic
Energy Commission official warned that General Electric (GE), the reactor’s designer, had
used “data from tests not applicable to accident conditions” in safety assessments. The
official recommended that “such designs not be accepted for construction permits” in the
future. GE simply brushed aside this concern and, because it is indemnified by the
Japanese liability regime, has not paid anything for the Fukushima accident.
Indemnity removes any direct economic incentive for suppliers to ensure reactor safety
once a sale is completed. This is not a hypothetical concern. Following the 1979 accident at
Three Mile Island, the Kemeny Commission established by the U.S. government noted that
Babcock & Wilcox, the supplier of the reactor, had identified a safety hazard in an “earlier
accident, bearing strong similarities to the one at Three Mile Island”. Even though an
engineer at the company had “urged, in the strongest terms, that clear instructions be
passed on to the operators” to mitigate this hazard, the supplier failed to do so.
Backtracking on progress
Nuclear suppliers were furious at the idea that they might have to pay for accidents in
India. To appease these companies, the UPA government made farcical attempts to dilute
the right of recourse, both during and after the parliamentary debates on the law. This led
the Bharatiya Janata Party leader Arun Jaitley to write that a “leopard never changes its
spots.”
However, after assuming power, the National Democratic Alliance government has
pursued precisely the same policy of prioritising nuclear corporations over potential
victims. Following U.S. President Barack Obama’s visit to India in 2015, the Ministry of
External Affairs issued a set of “frequently asked questions” downplaying the operator’s right of recourse, and disingenuously suggesting that it could be bypassed using a
contractual arrangement between the supplier and the NPCIL.
These machinations have not satisfied U.S. suppliers who are unwilling to expose
themselves to any legal hazard in India. Their concerns are easy to guess. Although the
current liability cap is low, a future government might rationalise it to reflect the true cost
of an accident, exposing these companies to large financial risks. Moreover, accepting even
minimal liability in India endangers their cosy arrangements in other countries where
they have successfully demanded complete indemnity.
Finally, if the liability law mandates an assessment of the supplier’s culpability, this might
allow victims to hold corporate executives to account using criminal laws in the event of a
disaster.
U.S. officials have actively lobbied on behalf of these politically influential companies. The
outgoing U.S. Ambassador to India, Eric Garcetti, recently indicated that he had been in
touch with leaders from both the ruling party and the Opposition in an effort to have the
law amended. He also lamented that U.S. corporations had been unable to sell a single
reactor to India nearly two decades after the U.S.-India Civil Nuclear Agreement. However,
this has allowed India to avert a costly mistake as the troubled track record of these
reactors in their home country shows.
The leading American reactor design on offer is called the AP1000. Electric utility
companies commenced construction on four such reactors in the U.S. Two of these
reactors, in South Carolina, were abandoned after repeated delays and cost escalations
even though more than $9 billion had already been spent. Two other reactors, in Georgia,
were completed at an eye-popping cost of $36.8 billion, over 250% of the $14 billion
estimate provided at the start of construction.
These high costs translate to expensive electricity. Even taking into account lower labour
costs in India, the cost of electricity from such reactors would be several times higher than
competing sources as the writers of this article showed in a 2013 study in the Economic &
Political Weekly. Small modular reactor designs, such as those offered by the U.S.’s
NuScale Power corporation, are likely to be even less economical since they lose out on
“economies of scale”.
Hollow safety claims
The debate on liability also exposes the exaggerated safety claims made by suppliers.
Westinghouse claims that a large release of radiation from an AP1000 reactor would
happen only once in 50 million years. If reactors are so safe, why would nuclear vendors
take extreme precautions to protect themselves from the consequences of an accident? If
companies such as Westinghouse recognise that the risk of an accident is real and are
unwilling to risk financial losses, why should Indian citizens who live near a reactor be
willing to risk their lives and property?
Prime Minister Narendra Modi projects an image of a strong global leader. However, the
government’s announcement on the liability law is a revealing commentary on that
message. When faced with pressure from the U.S. government, which puts the profits of
U.S. corporations above all else, Mr. Modi’s government seems unable to stand up for the
basic rights and the safety of Indians.