GoI Dilutes Suuplier's Liability in the Nuclear Liability Act through Subterfuge

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New rules give some relief to nuclear suppliers

Special Correspondent

PTI A graphic presentation containing key recommendations on nuclear liability bill.

GoIThe government has finalised rules for the implementation of the country's new nuclear liability that aim to meet the concern of American nuclear suppliers wary of being exposed to unlimited liability in the event of a Fukushima-type accident involving any of their reactors.

The rules, which were notified on November 11, were made public on Wednesday on the eve of Prime Minister Manmohan Singh's visit to Bali for a regional summit where he is also set to meet U.S. President Barack Obama. They are, however, unlikely to satisfy U.S. objections even as they trigger criticism at home for what the Opposition will see as a dilution of Parliament's legislative intent in enacting a tough liability law last year.

American officials had opposed two provisions of the Indian Civil Liability for Nuclear Damage Act that stemmed from the legislature's refusal to indemnify foreign suppliers from accidents caused by faulty equipment. Section 46, which allows ordinary citizens to file tort claims for damages, is seen by the U.S. nuclear industry as exposing its companies to unlimited liability in the event of an accident. The new rules do not affect this Section, thus leaving the primary American complaint unaddressed.

Washington's second objection is to Section 17(b), which grants Indian operators a right of recourse against nuclear suppliers if an accident results from the “supply of equipment or material with patent or latent defects or sub-standard services.”

The new rules do not directly affect 17(b) but open a door for its dilution by giving suppliers the option to piggy-back on 17(a) — which penalises a supplier if he had accepted liability in a written contract — and thereby limit their exposure in the event of faulty equipment to accidents which occur in the first five years of the reactor's operation. The rules do this by specifying that the provision for the right of recourse under 17(a) “shall be for the duration of initial licence issued under the Atomic Energy (Radiation protection) Rules of 2004, or the product liability period, whichever is longer.” The 2004 rules state in Section 9 that every licence runs for a period of five years and the 2011 rules define “product liability period” as the period for which a supplier accepts liability for an accident caused by defective equipment in a contract. By this fix, Indian officials will tell the U.S. that an American vendor can limit its exposure for an accident to five years and Rs. 1,500 crore.

However, since the Fukushima-Daiichi accident in Japan happened some three decades after the initial reactor supply, critics in India are likely to ask whether the five year limit specified by the rules is prudent – or even legal, given that the Liability Act itself specifies no such term limits.

Ironically, Indian officials fully expect to be told in Bali later this week that the new rules do not match up to American expectations. That is why U.S. officials have been floating other solutions, such as getting the International Atomic Energy Agency to “vet” the Indian law to see if it is compliant with the Convention on Supplementary Compensation for Nuclear Safety, an international treaty that India has committed to sign. South Block sources toldThe Hindu that India has flatly rejected this suggestion and is likely to say so publicly if the U.S. pushes it again.