Modi’s US visit and Indian nuclear conundrum

downloadThe eagerly awaited Modi-Obama summit, scheduled for September 29-30, is expected to “set an ambitious new agenda to chart a new course in the relationship” between the two countries. Considering the six years long stalemate owing to India’s Civil Nuclear Damage Liability bill, the Indo-US nuclear deal will indeed be a key topic of discussion. The historic deal which was essentially the ice-breaker of India’s nuclear isolation of almost thirty years has been in many ways compensatory to its NPT non-signatory status. An agenda to move forward the long-stalled deal is bound to gain momentum presently as India endeavours for civil nuclear deals with Japan and Australia and its NSG membership.

India, with its ambitious nuclear energy plans, is definitely an attractive market for the suppliers around the globe. All the suppliers interested in the Indian market, namely the US, France and Russia, have however unequivocally objected to the Civil Liability for Nuclear Damage bill of 2010, specifically clause 17(b) and section 46. These deal with the right of recourse for the operator against the supplier and right to file tort claims for the victims respectively. The US has been the most disconcerted with this because the suppliers and contractors of the US are privately owned unlike their European state-owned counter-parts. The US government, in the interests of its major private suppliers collective, had pressurised the Indian government to be party to the Convention on Supplementary Compensation for Nuclear Damages (CSC), the most significant international instrument for model liability regime.

The concept of exclusive liability, or channelling of liability (to the operator), which is the corner stone of all the international instruments of nuclear liability, has been followed since the first convention on this issue — Vienna Convention on Civil Liability for Nuclear Damage of 1963. E Ameye, member of the European Commission Expert Group on Nuclear Liability, argues that the nuclear industry is no longer an infant industry and that the possible role of the players other than the operator such as the suppliers, designers, transporters etc should be taken into account, considering the highly complex and evolved reactor technologies of today. The Indian legislation’s additional right of recourse and the right to file tort claims hence can be seen as a firm footing for a necessary paradigm shift from the traditional liability models.

The CSC (1997) is the latest among the three international conventions instrumental for the liability regime. The acceding countries are obliged to model their domestic liability legislation on its draft law. The annexe draft law specifies the right of recourse for the operator only a) if this is expressly provided for by a contract in writing, or b) if the damage results from an act or omission of someone with intent to cause damage. The clause 17(b) of the Indian liability act gives an additional ground for right of recourse for the operator against the suppliers: ‘if the damage is caused by a wilful act or gross negligence on the part of the supplier of the material, equipment or services or of his employee.’ The section 46 of the Indian Act states that the liability bill will not affect the other laws in force, thus implying that in case of an accident, criminal liability as well as tort claims remain valid. The CSC cannot in any way interfere in the normal operation of the regular legal mechanisms of the country. Thus it can be argued that the two tweaks from the model draft law, technically do not violate the terms of CSC; only explicitly states its implications. The US had however contended that India’s liability law is not in conformity with the CSC. In response, rightly so, India had contended that the only requirement for signing the CSC was that the concerned “State declares that its national law complies with the provisions of the Annex to this Convention.” Although India has signed the CSC on 27th October 2010, the ratification is yet to happen.

The Liability Act faces equally strong critiques in the domestic front as well, mainly on account of the liability cap on the operator. The total liability amount would be capped at a maximum amount of 300 million SDR (Special Drawing Rights), regardless of the extent of the damages caused in case of an incident. This amount is also inadequate to draw funding from the international pool created as part of the CSC as it can be accessed only if the liability due to nuclear damage exceeds 300 million SDR. Moreover, most of the major nuclear power generating countries do not have a cap on the liability. On the flip side, the domestic suppliers too are unwilling to supply the components for nuclear power plants. This will definitely spark a crisis in the Indian nuclear industry, which has managed even without the foreign suppliers when under sanctions, with extensive reliance on its domestic companies.

While addressing the liability conundrum, it needs be acknowledged that an effective liability regime is an important agent for assuring safety and containing any neglect by the key players involved. In a sense, its role is more significant than that of independent regulation. The risks of a nuclear establishment by nature are dynamic and complicated. This demands more flexibility for the operators, rather than step-by-step regulations enforced by an independent authority. With an effective liability rule, the operators can improvise and modify according to the risk he generates.

Finally, the question remains as to how the new government will choose to address this issue, balancing both the supplier and the domestic concerns. Dilution of the Liability Act is not an option, which is an important lesson learnt globally, even as Japan, Asia’s richest democracy, is dragging its feet with the decontamination activities and compensation to the victims, three years and counting post-Fukushima.

It may be safely assumed that the nuclear suppliers will not keep away from the lucrative Indian market, considering the extensive nuclear plan it is determined to embark upon. It is probable that the suppliers may increase their prices to an unreasonable level in the name of high insurance premiums. However, this will eventually be a backlash for the suppliers because of the possible market crash due to high costs of nuclear energy compared to the alternatives. Given the situation, the most desirable solution would be for the suppliers to accept the Indian Liability Act as an incentive to ensure the maximum possible safety and security of the materials and services, instead of dealing with it as an impediment.

As a first step towards nuclear diplomacy, the Modi Government’s ratification of the IAEA Additional Protocol is indeed a wise one. Whether the “Modi lexicon” would charm the long-flustered US suppliers, is a pivotal question for the Indian nuclear programme.

The views expressed in this article are solely those of the author. 
Courtesy: ORF

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