You are here

India: profits for foreign investors, risks for taxpayers

Nuclear Monitor Issue: 
Brahma Chellaney

At the last minute, the Indian Government deferred the introduction of the “Civil Liability for Nuclear Damage Bill” on March 15, after strong opposition. Aware that the bill's non-introduction was seen as a setback, the government belatedly initiated a major salvage operation to retrieve lost ground with briefing a panel of Congress MPs on the legislation. Indian Prime Minister Manmohan Singh reportedly wanted the bill passed in advance of his visit to Washington in April but could now aim for its passage before US President Barack Obama visits India, likely later this year.

The civil nuclear liability bill is a deeply flawed piece of legislation that the government has done well to develop cold feet about. The fatal flaw is the bill's perspective. The aim of any reasonable nuclear liability law should be to provide adequate and speedy compensation to the victims of a nuclear accident.

But this one, the Civil Liability for Nuclear Damage Bill seeks to burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant. The special Indian law limiting liability in amount and in time has been sought by Washington for its nuclear-exporting firms, with the largest two, Westinghouse and General Electric (GE), set to win multibillion-dollar contracts to build several commercial nuclear power reactors.

The Indian government had finally released the text of its controversial nuclear-accident liability Bill early March. The text not only confirms the concerns expressed earlier over key elements of the proposed law but also raises additional issues of worry. This proposal is risky for several reasons, including the fact that it provides the nuclear reactor manufacturers the option to maximise profits by reducing building and safety standards without fear of prosecution.

The bill is crucial to the operationalisation of the Indo-US nuclear deal, but India is under no international obligation to pass this bill which, in reality, attempts to convert the liability of a foreign reactor supplier into a rather pathetic compensation, to be paid by the Indian taxpayer. Though the bill is America-centric, if passed it will apply equally to reactors supplied by France and Russia for which presumably different, and as yet unpublicised, conditions would have been put in the contracts.

What stands out in the Civil Liability for Nuclear Damage Bill is the extent to which it goes to aid the business interests of the foreign reactor builders.

Under the Bill, the foreign reactor builder — however culpable it is for a nuclear accident — will be completely immune for any victim-initiated civil suit or criminal proceedings in an Indian court or in a court in its home country. The Bill actually turns the legal liability of a foreign reactor supplier for an accident into mere financial compensation — that too, pegged at a pittance and routed through the Indian state operator of the plant. Foreign suppliers will have no direct accident-related liability.

Another key issue relates to the rights of victims. The Bill ensures that victims of a disaster involving a foreign-built reactor will not be able to sue the builder in its home country. Worse still, the Bill blocks the victims from suing the foreign supplier even in Indian courts.

In fact, the Bill seriously shackles Indian courts. All nuclear-damage claims will be dealt with by a Claims Commissioner or a Nuclear Damage Claims Commission, and any award made “shall be final” and cannot be appealed in any court. “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the Claims Commissioner or the Commission, as the case may be, is empowered to adjudicate under this Act and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act,” according to Clause 35.

The Bill also limits liability in time, with Clause 18 stating: “The right to claim compensation for any nuclear damage caused by a nuclear incident shall extinguish if such claim is not made within a period of 10 years from the date of incident…” . That provision was retained despite the Environment Ministry's note of caution that the 10-year time limit was untenable because damage to human health from a serious radioactive release “involves changes in DNAs, resulting in mutagenic and teratogenic changes, which take a long time to manifest.”

And although the Finance Ministry, in its comments on the Bill, had warned the proposed law would “expose the government to substantial liabilities for the failings of the private sector,” the Bill essentially seeks to give foreign reactor builders a free ride at the Indian taxpayer's expense.

The Indian Bill, in effect, amounts to a huge hidden subsidy by protecting foreign reactor builders from the weight of the financial consequences of accidents. If the Bill is passed, the costs of doing business in India for foreign suppliers will be low but the assured profits will be high. To cover the maximum potential compensation payable for an accident, a foreign builder will need to take insurance for a mere Rs. 500 crore (US$109 million or 80 million Euro). What is more, the foreign builders are being freed from the task of producing electricity at marketable rates. The state operator NPCIL (Nuclear Power Corporation of India Limited) will run the foreign-built reactors, with the state subsidising the high-priced electricity generated.

Sources: Brahma Chellaney in The Hindu (India), 13 March 2010 / The Asian Age, 15 March 2010 / UPI, 16 March 2010 / The Times Of India, 17 march 2010
Contact: WISE India