Work underway for changes in two key laws, can open up civil nuclear sector

Indian Express

a day ago

Legislative groundwork is underway for multiple amendments to two overarching laws governing the country's atomic energy sector. The changes will align them with legal provisions globally, address festering investor concerns and set the stage for opening up India's civil nuclear sector.
The first is the easing of provisions in India's nuclear liability law. Called the Civil Liability for Nuclear Damage Act, 2010 (CLNDA), it sought to create a mechanism for compensating victims from damages caused by a nuclear accident, and allocating liability and specifying procedures for compensation.
But it was subsequently cited as an impediment by foreign equipment vendors such as US-based Westinghouse Electric and French nuclear company Framatome. This was on the grounds that this legislation channelised operators' liability to suppliers through a provision called the right of recourse of the operator — an operator of a nuclear plant would typically be a company such as the state-owned Nuclear Power Corporation of India Ltd (NPCIL) while the suppliers could include foreign reactor manufacturers such as Westinghouse or Framatome, but also domestic equipment suppliers such as L&T or Walchandnagar Industries.
Foreign vendors, both involved in the nuclear island and the conventional parts of an atomic power project, cited this specific provision of the operators' 'right of recourse' as a reason for worries about investing in India's nuclear sector due to fear of incurring future liability in the event of a nuclear accident.
A set of around 11 legal amendments are now being worked out for the CLNDA, of which two are key. One is an amendment aimed at diluting a specific provision – Section 17 (b) of the CLNDA, which is seen to be at odds with similar nuclear liability legislations enacted worldwide.
According to Section 17 of the CLNDA, the operator of the nuclear installation, after paying the compensation for nuclear damage, shall have the right to recourse where – (a) such right is expressly provided for in a contract in writing; (b) the nuclear incident 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; and (c) the nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.
Provision (b) is the one that is a specific insertion in the Indian context and is cited as an impediment by foreign vendors, none of whom have invested in a single project in India since the legislation came into force.
This is a cause for worry for Indian sub-vendors too, since the term 'supplier' is seen to be too broad in scope.
'There are multiple amendments (now) being worked out. The most important include bringing Section 17 on par with international benchmarks. The other is to clarify the definition of a supplier and address the concerns raised by domestic nuclear equipment manufacturers that sub-suppliers are also deemed to be included in the current definition, given that there is no distinction of the terms supplier in the current legislation,' a senior government official involved in the deliberations said. Smaller Indian vendors are learnt to have raised this as an issue.
The official said that in any case, nuclear projects in India have to go through a vetting by the country's atomic regulator AERB, which is sufficiently empowered to ask for the right of recourse to be expressly provided for in a contract in writing while clearing all future contracts.
There are also deliberations on capping the liability of equipment vendors, both in terms of limiting the monetary exposure to the original value of the contract and a possible time frame limitation on when this liability would apply. While this was being targeted for the upcoming monsoon session of Parliament, the official indicated that this might get spilled over to the next session given the tight timelines.
The second major amendment in the works is aimed at enabling private companies to enter nuclear power plant operations in India, and could also set the stage for foreign companies to potentially take a minority equity exposure in upcoming nuclear power projects.
Hitherto, atomic energy has been one of India's most closed sectors. The set of legal amendments are being seen as a reform push that could help leverage the commercial potential of the Indo-US civil nuclear deal, nearly two decades after it was inked. New Delhi is also keen to package this as part of a broader trade and investment outreach with Washington DC, which could eventually culminate with a trade pact that is currently under negotiation.
Amendments to the second key legislation – the Atomic Energy Act, 1962 – are being initiated to enable private companies, and possibly even foreign players at a later stage, to enter nuclear generation as operators, which is currently restricted to only state-owned companies such as NPCIL or NTPC Ltd.
The government has committed to getting both these legislations passed, including an explicit assurance to this effect made in the Union Budget presented earlier this year, even though the legislative route for at least one of the two proposed Bills would be an arduous one.
The amendments in the CLNDA would effectively bring India's nuclear liability legislative framework in line with the provisions of the 1997 Convention on Supplementary Compensation for Nuclear Damage (CSC), which sought to establish a worldwide liability regime. Under this, a country that is a party to either the 1963 Vienna Convention or the 1960 Paris Convention could automatically become a party to the CSC, while a country that was not a party to either of these conventions could also become a party to the CSC if its national law on nuclear liability were to be in compliance with the provision of the CSC and its annexures.
India, not being a party to the Vienna or the Paris Conventions, signed the CSC on October 29, 2010 on the basis of its national law namely the CLND Act and ratified it on February 4, 2016, thereby becoming a 'State Party' to the CSC. The tweaks now proposed in the CLND Act would align it further with the CSC provisions, officials indicated.
Also, on the definition of the 'supplier', and whether it is always assumed to be a foreign company, there is now a move to clarify this aspect contained in Rule 24 of the CLND Rules, which says that 'supplier' shall include a person who: (i) manufactures and supplies, either directly or through an agent, a system, equipment or component or builds a structure on the basis of functional specification; or (ii) provides build to print or detailed design specifications to a vendor for manufacturing a system, equipment or component or building a structure and is responsible to the operator for design and quality assurance; or (iii) provides quality assurance or design services. While the interpretation of this formulation is that 'the system designer and technology owner' is the supplier, there is lack of clarity on whether the terms supplier includes only say a reactor provider such as Westinghouse, or even a small electrical package provider that bagged a tender for Rs 1 crore for a nuclear project. This clarification of the term supplier would also be done in the proposed amendments, the official said.
'There is an economic necessity for these amendments to be done,' the official said, indicating the amendments are now likely to spill over beyond the monsoon session.
The big challenge would be to build the political consensus to push the two major legislative amendments through.
All this comes less than three months after the US Department of Energy (DoE) accorded an unprecedented regulatory clearance to Holtec International, based in Camden, New Jersey, that potentially sets it on course to leverage the commercial potential of the Indo-US civil nuclear deal.
The March 26 approval from DoE effectively cleared Holtec International's application for specific authorisation with respect to the DoE's restrictive regulation that is referred to as '10CFR810'. This specific authorisation (SA IN2023-001) now conditionally permitted Holtec to transfer 'unclassified small modular reactor technology' (SMRs) to its regional subsidiary Holtec Asia, as well as Tata Consulting Engineers Ltd, and Larsen & Toubro Ltd in India.
The issue of getting a specific '10CFR810' authorisation (Part 810 of Title 10, Code of Federal Regulations of the US Atomic Energy Act of 1954) had been a big regulatory hurdle for New Delhi. This is because the regulation, while giving American companies such as Holtec the ability to export equipment to countries such as India under some strict safeguards, explicitly barred them from manufacturing any nuclear equipment or performing any nuclear design work in India.
This provision was a non-starter from New Delhi's perspective, which wanted to participate in manufacturing the SMRs and co-produce the nuclear components for its domestic needs.
With Washington DC having eased out the regulatory hurdle in the form of the 810 authorisation, the ball is now in New Delhi's court to push through the two legislations at its end.
Anil Sasi is National Business Editor with the Indian Express and writes on business and finance issues. He has worked with The Hindu Business Line and Business Standard and is an alumnus of Delhi University. ... Read More