India needs to take a harder look at its nuclear liability law

At the COP26 meeting in Glasgow this week, India hinted that it would be able to meet its climate commitments better if it was allowed membership of the Nuclear Suppliers Group (NSG). It was a clever diplomatic ploy, and unlikely to succeed. India’s nuclear challenges go beyond the climate crisis.

India is at present a member of three of the four global non-proliferation regimes — Wassenaar Arrangement, Missile Technology Control Regime (MTCR) and Australia Group. The fourth one, the Nuclear Suppliers Group (NSG), however, continues to elude India, largely because of one country, China, whose opposition is couched in non-proliferation language.

China has also asked for Pakistan to be granted membership along with India, to rob India of the “special” tag that came with the NSG waiver to the India-US nuclear deal back in 2008.

China acceded to that waiver, kicking and screaming, and has since nursed that diplomatic humiliation — Chinese diplomats walked out of that last meeting of the NSG in Vienna in September 2008, and were sent back after a midnight phone call from Washington. Beijing was determined that India would not get another free pass into the nuclear world.

The NSG membership has proved elusive. The Obama administration wasn’t going to do any more nuclear heavy lifting for India, most definitely not by taking on China (Obama himself was a reluctant accepter of the nuclear deal anyway, author of one of the infamous “killer” amendments to the Hyde Act). Trump didn’t care and Biden has too many China challenges on his hands to pick up another one.

China’s opposition, however, has provided a tailwind to the non-proliferation ayatollahs in different parts of the world, albeit silently. This basically means — in any NSG meeting, China can pull at least five other holdouts to India’s membership.

In addition, if India is struggling to access certain specific missile components or power reactor components, say, from Japan, the lack of the NSG membership is trotted out as a reason. For those who say, that the NSG waiver was all we needed, the last decade has shown conclusively that it is not. The lack of membership is still used by many countries against India.

On the climate/clean power front, the Indian government has focused its headlines on solar, wind and green hydrogen, not nuclear. India also has an installed power capacity of 388.1 GW. Out of this, 234 GW is thermal and over 80 per cent of the remainder are solar, wind and hydro.

The space for nuclear power is small. And this, while knowing full well that nuclear is the only other source to provide base-load power in addition to thermal, certainly in the absence of credible storage capabilities for other forms of renewable power.

Nevertheless, in May 2017, the Modi government announced its “atmanirbhar” plans by building ten 700-MWe pressurised heavy water reactors (PHWR) — Kaiga 5 and 6 in Karnataka, Chutka 1 and 2 in Madhya Pradesh, Mahi Banswara 1, 2, 3 and 4 in Rajasthan and Gorakhpur 3 and 4 in Haryana — in fleet mode. This was the first big move on nuclear. The first orders for major components by NPCIL to BHEL went out in January 2021. The idea is to roll out one nuclear reactor a year from 2022.

The nuclear establishment of India, ayatollahs in their own right, are on the slow train to mission completion. Some of it can be attributed to their work culture which remains out of public purview. But some of it can also be attributed to the fact that India, despite the NSG waiver, struggles to access components because, well, there’s no NSG membership. This has slowed the nuclear power enterprise. Meanwhile, in the rest of the world, nuclear power is enjoying something of a renaissance, certainly in design, size and safety.

There is also experimentation going on with small, modular reactors (SMRs) —  the Canadians are toying with the idea of 190-MWe integral molten salt reactors. With new and innovative designs, and using something called ‘generation IV molten salt reactor technology, the Americans are playing around with these ideas too. So is Russia, which is reportedly considering building smaller floating reactors in the Arctic Ocean. Even the UK is working on 440 MWe modular reactors. China is reportedly testing a thorium nuclear reactor. According to reports, it is unusual in that it has molten salts circulating inside instead of water. Apparently, this can produce safer and cheaper energy with less waste. India’s own thorium projects are even more ambitious, but yet to be unveiled to the world. There may be a bunch of other innovations like this happening around the world.

India connected to the grid KAPP-3, the first 700 MWe indigenously developed PHWR, in July 2020. Therefore, it can actually hold its own in the global nuclear power debate on smaller reactors. New Delhi could be a part of this evolving global conversation. An India outside the NSG is a definite minus here. As former environment minister Jairam Ramesh said in an interview this week, “India should have standardised on its own design of a heavy water reactor. It should not depend on imported reactors. Two standard 700 MW reactors are coming up in Kakrapar and more elsewhere. India should standardise on those reactors. We should build on those reactors.”

But, and this is something we don’t acknowledge enough, a big drag is India’s Civil Nuclear Liability law (CLNDA).

The liability law, passed in 2010, has spooked nuclear suppliers due to two clauses, 46 and 17(b), of which the latter was deemed most problematic. The offending Clause 17(b) said, the operator could seek recourse against supplier/s if “the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes the supply of equipment or material with patent or latent defects or sub-standard services.” This, being over and above the Operator (in India’s case, the central Government) having to bear the primary liability.

This is believed to be in violation of the international Convention on Supplementary Compensation for Nuclear Damage (CSC) which governs civil nuclear liability rules. However, India became a state party to the CSC in 2016, so that couldn’t have been such a big problem. The second clause that stuck in the throat was Clause 46, which essentially states that the operator of the nuclear plant could be charged for compensation under other Indian laws too.

Nevertheless, the CLNDA not only scared away foreign suppliers but put the locks on Indian nuclear supplier companies too. The Indian government clarified the rules in a series of FAQs, issued separately by MEA and DAE in 2015. They said the operator, in India’s case, NPCIL, would classify itself as a “supplier” by expanding the definition of a “supplier”,  thereby putting external suppliers off the hook. An Indian Nuclear Insurance Pool was also set up to cover liability for suppliers. The government, too, went out of its way to reassure suppliers.

It worked to a limited extent. Indian suppliers came back on line, largely because their premier, often the only customer is the government. But foreign suppliers still stayed away. Only Russia and France are still in the game. The Russians are soldiering away at Kudankulam, with a technology well past its prime, not to speak of the fact that it has cost India much more than it should have.

The French EDF is supposed to be building the world’s biggest nuclear reactor — a six-reactor complex (also in fleet mode) in Jaitapur, Maharashtra. Notwithstanding their own problems, they too have been skittish about the liability law, which is one of the big reasons for such a long delay.

The Indian government has tried to nurse the project though, and in April 2021, EDF made its “binding” techno-commercial offer to the Indian government to build six Generation III EPR nuclear power reactors. (Just saying, these same EPR reactors have been built in record time in China — Taishan-1 and -2 in Guangdong province. Taishan-1 began commercial operation in December 2018 and Taishan-2 in September 2019.)

Needless to add, these negotiations would have been easier if India’s liability law didn’t scare companies and countries. It would have also been easier if India was a member of the NSG.

We have to acknowledge that apart from France and Russia, no other country has much interest in seeing India in the NSG. Nobody really has any nuclear stakes in India. Russia knows it can take forever to build its reactors. The French are dong what they do best, white wine at champagne prices. Westinghouse was to build two reactors in Kovada, but they have self-destructed. The Japanese are still traumatised by Fukushima. There’s nobody else on the horizon.
The limited point is, Climate is not going to be enough to get India into the NSG. Other countries have to feel it’s in their interest to support India. India has to provide that playing ground to create those interests.

The problem, as always, lies in politics. When the liability law was being drafted, it was in the background of the anniversary of the Bhopal disaster. Both the government (UPA) and the opposition (NDA) tried to outdo each other in competitive nationalism, which meant only an extremely protective stance was acceptable. Also, let’s face it, the Indian nuclear establishment is much happier functioning in a hermetically sealed environment. The Indo-US nuclear deal opened one door. The liability law closed it. Everybody was happy.

That cannot go on. The Indian government recently opened up the space sector to the private sector and innovation, they rewrote the retrospective tax law to benefit the private sector. India has to find a fix in its nuclear liability law that protects sovereignty but enables other countries to build interests in India’s nuclear power industry. This will help boost the voices in the NSG room in India’s favour when the vote comes up.

The above article was written by Idrani Bagchi and first published in the The Times of India on 7 November 2021

By |2021-11-08T10:46:29+08:00November 8th, 2021|industry-insights|0 Comments