Based on the official figures made available by the Department of Atomic Energy, a department under the direct control of the Prime Minister of India ("DAE"), the installed nuclear power capacity in India as of February, 2024 stood at 7,480 MW (which is 1.6% of our total installed capacity). The current nuclear power projects comprise of 19 pressurised heavy water reactors ("PHWRs"), 2 boiling water reactors and 2 pressurised water reactors.
The Government of India ("GoI") seems to recognize the role that nuclear power could play in ensuring long term energy security, and in helping India achieve its ambitious targets of 500 GW of installed capacity from non-fossil sources by 20301 and honouring its commitments under the Paris Climate Accord i.e.,: (i) to reduce emission intensity to 45% below 2005 levels by 2030, (ii) generate about 50% of its power from non-fossil fuel-based energy resources by 2030, and (iii) achieve net-zero carbon emissions by 20702. And, this is reflected by its plan to triple the installed nuclear power capacity from 7,480 MW to 22,480 MW by 2031-2032, and subsequently increase it to 100 GW by 2047.
Currently, in India, nuclear power plants are owned by government companies only, being Nuclear Power Corporation of India Limited ("NPCIL") or Bharatiya Nabhikiya Vidyut Nigam Limited. This is due to a requirement of the Indian legal regime permitting only the Central Government or any authority or corporation established by it or a Government company who has been granted a license pursuant to the Atomic Energy Act, 1962 to own and operate nuclear power plants in India. Relevantly, the Atomic Energy Act, 1962 was amended in 2015 to allow public-sector companies to form joint ventures to build nuclear power plants.
Foreign direct investment ("FDI"), in India, is governed by the Foreign Exchange Management Act, 1999 ("FEMA") and the rules/ regulations issued thereunder read with the FDI Policy issued by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, GoI ("DPIIT")3 as updated pursuant to press notes and directions and circulars issued by the Reserve Bank of India from time to time. Importantly, the legal framework for FDI in India does not permit foreign investment in atomic energy under the automatic route. However, as per DAE's press information release dated August 10, 2016, "foreign companies can however, invest in the supply chain for nuclear power projects". Further, as per DAE's press information release dated September 16, 2020, "there is no restriction on FDI in the nuclear industry for manufacturing of equipment and providing other supplies for nuclear power plants and related other facilities". Although, no formal Government notification/ regulation has been issued permitting FDI in the supply chain for nuclear power projects.
Some Government Initiatives
Some of the recent significant steps taken by the GoI to push the development of nuclear power in India include the grant of administrative approval and financial sanction, by the GoI, for the construction of ten indigenous PHWRs, each with a capacity of 700 MW, to be set up in fleet mode; relevantly, pre-project activities in respect of these reactors has commenced4. This is a first of its kind project for India's nuclear power sector, as these reactors would be completely made in India. Further, the construction of ten reactors totalling 8,000 MW is underway in the states of Gujarat, Rajasthan, Tamil Nadu, Haryana, Karnataka and Madhya Pradesh5. Further, the GoI has accorded in-principle approval to set up 6 x 1,208 MW nuclear power plants in cooperation with the United States of America at Kovvada in Srikakulam district in Andhra Pradesh6.
Relevantly, in May, 2023, there was news that NITI Aayog, the apex public policy think tank of the GoI, has: (i) recommended amendments to the Atomic Energy Act, 1962 and the FDI Policy, so that both, domestic and foreign private companies, can complement nuclear power generation by public companies, and (ii) emphasized on the importance of involvement of private capital to accelerate the development and deployment of small modular reactors.
Based on publicly available information, it seems that the GoI is in discussions with private entities (including Reliance Industries, Tata Power, Adani Power and Vedanta Limited) to invest around INR 440 billion each in the nuclear power space7. And, that the GoI is in discussions with foreign companies for the expansion of India's nuclear programme.
Lately, there has been a fair amount of discussion around the deployment of small modular reactors, and it seems that the GoI is working on schemes similar to production linked incentive scheme for manufacturing small modular reactors. This could potentially be attributed to the significant savings in cost and construction time offered by small modular reactors in contrast to traditional nuclear reactors. Relatedly, the 2024 G20 Summit in India saw India and the United States of America agreeing to collaborate on the development of next generation small modular reactor technologies. The GoI also seems to be in discussions with France and Russia to collaborate on the development of small modular reactors. Further, it seems recently, the Indian Oil Corporation Limited and NPCIL commenced discussions regarding the potential construction of small modular reactors.
The perceived safety risk of nuclear power projects and reluctance of foreign suppliers to join perhaps are some of the reasons of slow growth of nuclear power in India. While foreign suppliers have been interested in the Indian nuclear market for a very long time, their participation has unfortunately, for most, not fructified. The main reason behind this reluctance of foreign supplier seems to be their apprehensions with the liability regime for nuclear accidents. We now briefly discuss this below.
Civil nuclear liability regime
To address the liability issue, the Indian government enacted the Civil Liability for Nuclear Damage Act, 2010 ("CLND Act")8. The CLND Act inter alia provides for civil liability for nuclear damage and prompt compensation to the victims of a nuclear incident through a no-fault liability regime channelling liability to the operator9 of the nuclear installation. The CLND Act came into force on November 11, 2011. Subsequently, in exercise of the power conferred by Section 48 of the CLND Act, the GoI framed the Civil Liability for Nuclear Damage Rules, 2011 ("CLND Rules") which came into force on November 11, 2011.
Further, to clarify certain ambiguities related to the CLND Act, the Ministry of External Affairs under the GoI issued and published the 'Frequently Asked Questions and Answers on Civil Liability for Nuclear Damage Act 2010 and related issues' in February, 2015 ("FAQs")10. These FAQs were supplemented by another round of frequently asked questions issued by the DAE in August, 2020 ("FAQs 2.0")11. Relevant to mention that while the FAQs are not legally binding, they may provide guidance to the courts while interpreting the provisions of the CLND Act.
Relevantly, in 2010, India signed the Convention on Supplementary Compensation for Nuclear Damage ("CSC") and subsequently ratified it on February 4, 2016 pursuant to an instrument of ratification submitted to the Director General of the International Atomic Energy Agency, declaring compliance of its national law with the Annex of the CSC. However, ratification of the CSC also did not allay the concerns of the suppliers regarding the liability regime.
Pertinent to mention here that, the constitutionality of the CLND Act and the CLND Rules has been challenged in the Indian courts and the matter is currently sub-judice; and the Supreme Court of India has not yet interpreted the provisions of the CLND Act and the CLND Rules.
Broadly, the suppliers' concerns are three-fold and pertain to:
- an additional operator's right of recourse against
the supplier under Section 17 (b) of the CLND Act –
once the operator has paid the prescribed amount for a nuclear
damage, it has a right of recourse against the supplier as provided
in Section 17 of the CLND Act which amongst others includes a
nuclear incident which has resulted as a consequence of an act of
supplier or his employee, which includes supply of equipment or
material with patent or latent defects or sub-standard services.
While this is an additional right of recourse that is not provided
under the Annex to CSC, the GoI has clarified that this is nothing
but product liability stipulations/ conditions, which are
ordinarily part of a contract between the operator and the supplier
and not a novel situation12.
- claims under other laws pursuant to Section 46 of the
CLND Act – Section 46 of the CLND Act allows for
third party claims being raised against the operator under laws
other than the CLND Act (hereinafter collectively referred to as
"Other Laws").
Ever since the CLND Act was enacted, there has been ambiguity if this provision on third party claims applies to suppliers or not. The ambiguity is mainly due to:
- the fact that while the second part of Section 46
("nothing contained herein... against such
operator") clearly states that the CLND Act would not bar
proceedings under Other Laws against the "operator",
concerns have been raised that the first part of Section 46 of the
CLND Act may potentially be construed as preserving any claims or
remedies that a person may wish to pursue against suppliers outside
the ambit of the CLND Act (for instance, claims under tort law).
And, it may expose suppliers to risk of third-party claims in
relation to nuclear damage arising from a nuclear incident under
Other Laws;
- absence of provisions under the CLND Act expressly restricting
the rights/ remedies that a third party may have against the
supplier for nuclear damage; and
- the CLND Act not expressly stating that it has an overriding effect vis-à-visOther Laws.
- the fact that while the second part of Section 46
("nothing contained herein... against such
operator") clearly states that the CLND Act would not bar
proceedings under Other Laws against the "operator",
concerns have been raised that the first part of Section 46 of the
CLND Act may potentially be construed as preserving any claims or
remedies that a person may wish to pursue against suppliers outside
the ambit of the CLND Act (for instance, claims under tort law).
And, it may expose suppliers to risk of third-party claims in
relation to nuclear damage arising from a nuclear incident under
Other Laws;
Relevant to mention that there is one school of thought that prescribes the view that as the CLND Act was enacted in public interest, it would cause grave injustice to the victims of nuclear damage if they are restricted in seeking any remedy against the suppliers outside the CLND Act (especially when the nuclear damage was caused due to the faulty equipment/ materials supplied).
On the other hand, it could be argued that Section 46 of the CLND Act may apply only to the operator and not the supplier based on the overall scheme of the CLND Act, the clarifications provided under the FAQs and the fact that GoI has ratified CSC and confirmed that its national law complies with the provisions of the Annex to the CSC.
However, as courts have not yet interpreted the provisions of the CLND Act and the constitutionality of the CLND Act and the CLND Rules has been challenged before the courts in India, the risk of the courts interpreting Section 46 in a manner supporting third party claims for nuclear damage against suppliers under general laws (including claims under tort law) cannot be completely disregarded/ negated.
- insurance coverage under the Indian Nuclear Insurance
Pool ("INIP") – the INIP was launched on
June 12, 2015 with corpus of INR 1,500 crore (by General Insurance
Corporation of India along with several other Indian insurance
companies). It was formed as a risk transfer mechanism to cover/
transfer the risks of operators' and suppliers' liability
under the CLND Act (Section 6 (2) and Section 17 (a) and (b),
respectively) to INIP.
The main suppliers' policy under INIP is 'Nuclear Supplier's Insurance Policy (Right to Recourse only under the CLND Act)' ("NSIP") and it provides coverage for the supplier's liability under Section 17 (a) and/or (b) under the CLND Act. NSIP would not indemnify a supplier against any liability under Other Laws or any other laws of any other country (or under Section 17 (c) of the CLND Act). Based on some publicly available information, the main concern of suppliers inter alia relates to the fact that a supplier can avail a policy under NSIP only once the operator has availed a policy for the nuclear power plant under the operator's policy i.e., Nuclear Operator's Liability (CLND Act) Insurance Policy ("NOLIP"). Importantly, NOLIP insures all the existing nuclear power plants of NPCIL and needs to remain in full force and effect for the entire term of NSIP for a supplier to be able to make a claim under NSIP. Thus, adequacy of this insurance policy is a concern that the suppliers have been grappling with for some time now.
One of the steps initiated for addressing the small suppliers' concern on the civil nuclear liability regime is that NPCIL has agreed to include a clarification in its tender documents (and contracts) for engaging manufacturers/ vendors to supply systems, equipments, components, or building of structures, or provision of services to nuclear installations which it proposes to construct and for which NPCIL is the system designer and technology owner. Such clarificatory language provides that for such projects NPCIL would assume the role of the supplier and would be responsible for safety design of the installations. This is with an aim to give comfort to the smaller suppliers that they would not be responsible for liabilities under Section 17 (a) and (b) of the CLND Act read along with Rule 24 of the CLND Rules. However, enforceability of such provisions is certainly debatable.
Way forward
The GoI recognizes the role that nuclear power could play in assisting the country in meeting its net-zero emission targets. And, is indeed taking initiatives to increase the installed nuclear power capacity and to address the concerns of the suppliers to facilitate their participation in the nuclear power sector. Though, it appears that more focused and concrete steps would need to be taken by the GoI to move the focus on nuclear power development.
Footnotes
1. See https://www.investindia.gov.in/sector/renewable-energy.
2. India's Updated First Nationally Determined Contribution Under Paris Agreement, see https://unfccc.int/sites/default/files/NDC/2022-08/India%20Updated%20First%20Nationally%20Determined%20Contrib.pdf.
3. The latest consolidated FDI Policy was issued by DPIIT on 15 October, 2020.
4. https://sansad.in/getFile/annex/259/AU2562.pdf?source=pqars.
5. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1988863.
6. Ibid.
7. https://economictimes.indiatimes.com/industry/renewables/india-seeks-26-bln-of-private-nuclear-power-investments/articleshow/107848710.cms?from=mdr
8. The constitutionality of the CLND Act and the CLND Rules has been challenged in the Indian courts and the matter is currently sub-judice before the Supreme Court of India.
9. 'Operator' in relation to a nuclear installation, means the Central Government or any authority or corporation established by it or a Government company who has been granted a licence pursuant to the Atomic Energy Act, 1962 for the operation of that installation.
10. Frequently Asked Questions and Answers on Civil Liability for Nuclear Damage Act 2010 and related issues, accessed on May 6, 2024. Available at: https://www.mea.gov.in/press-releases.htm?dtl/24766/Frequently_Asked_Questions_and_Answers_on_Civil_Liability_for_Nuclear_Damage_Act_2010_and_related_issues.
11. FAQs Version 2.0 on CLND Act 2010, accessed on May 6, 2024. Available at: https://www.mea.gov.in/Images/amb1/FAQ_FOR_WEBSITE.pdf.
12. Frequently Asked Questions and Answers on Civil Liability for Nuclear Damage Act 2010 and related issues, accessed on May 6, 2024. Available at: https://www.mea.gov.in/press-releases.htm?dtl/24766/Frequently_Asked_Questions_and_Answers_on_Civil_Liability_for_Nuclear_Damage_Act_2010_and_related_issues.
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