No liability of endless nuclear supplies, reassures NPCIL

Courtesy: Times of India

The Indian government has circumscribed a contentious supplier liability clause in the Civil Nuclear Liability Act, walking a tightrope between the language of the act itself and the concerns of foreign and domestic nuclear suppliers. The rules governing liability of suppliers has been clarified in a way that is designed to reassure suppliers that they would not be liable endlessly on nuclear supplies.

The regulations, which were quietly put up on the NPCIL website on Wednesday evening have been a long time coming, keeping Indian and foreign suppliers on tenterhooks for almost a year.

The Act fixes no-fault liability on operators and gives them a right of recourse against certain suppliers. It caps the liability of the operator at Rs 500 crore. If the damage is greater the central government will pay up to 300 million SDR.

Beyond this, India can access an international corpus by signing on to the Convention for Supplementary Compensation (CSC). The trouble was, India’s liability law, which seemed to put unlimited liability on suppliers could have made the law non-compliant with the CSC once India ratified the convention. India had signed the CSC in November 2010, and had committed to ratifying it by end 2011. With Manmohan Singh scheduled to meet Barack Obama in Bali on Friday, this issue could have been embarrassing for the government.

Essentially, the rules place limits on the floor and ceiling of the amount of money the operator can claim from the supplier. It also places a time limit on the duration of liability for the supplier. thirdly, the operator cannot claim untold amounts of money from suppliers. The ceiling would be the amount he has already paid in actual compensation the day he files a claim from the supplier.

In its regulations notified on Wednesday, the government states, “the provision of the right to recourse shall be for the duration of the initial license under the atomic energy rules, 2004 or the product liability period whichever is longer.”

Further, the product liability period is defined as the period for which the supplier has undertaken liability for patent or latent defect or sub-standard services, which in layman’s terms means the warranty period for the product.

It’s not yet clear how the foreign and domestic nuclear companies would react to these regulations.

This particular clause 17 had scared away not only foreign private players, like US companies. The French foreign minister, Alain Juppe in his recent visit to India had made it clear that they would find it difficult to accept this clause. French nuclear giant Areva is contracted to build 6 nuclear plants in Jaitapur, Maharashtra.

The Russians have stressed that the civil nuclear liability law does not apply to the Koodankulam reactor which was signed in 1988. They too have expressed concerns about future reactors that would have this liability clause.

What troubled the government was that domestic nuclear suppliers like L&T and BHEL were most critical. Their contention was that foreign firms could, at a pinch, access vast sums in insurance which wouldn’t be available to them, thereby helping to kill the domestic nuclear industry. BHEL went to the extent of warning the main operator, NPCIL, that it would cease supplies to nuclear plants until the law was clarified.