Subsidising US Suppliers: The Nuclear Liability Bill

THE Congress-led UPA government has placed the Nuclear Liability Bill as one of 36 legislations it wants the parliament to pass this session. This is one more chapter in the sorry saga of the India US Nuclear Deal. The key part of the the proposed Bill is to absolve all US equipment suppliers of any liability. Without this, the US equipment suppliers will not supply any equipment and the US government has held up all action on the India US Nuclear Deal. Though the French and Russian equipment suppliers have not asked for any such liability legislation, the Manmohan Singh government has buckled under US pressure and is now willing to provide the US suppliers with this comfort.

The prime minister in his various speeches to the parliament had stated that the India US Nuclear Deal ensures lifting of ban on all dual use technology and has an up-front consent for reprocessing of spent fuel. The truth, as is apparent now, is quite different. In an interview  to Newsweek, on November 16, 2009, prime minister Manmohan Singh now says, “My sincere hope is that we can persuade the US administration to be more liberal when it comes to transfer of dual-use technologies to us. Now that we are strategic partners these restrictions make no sense…So, that is my number one concern.”

Fuel reprocessing is another critical issue, as otherwise, India could land in the old Tarapur mess of running from pillar to post for fuel for its reactors, while storing the spent fuel in costly holding ponds for decades. Dr Singh told parliament in 2007 that an “important yardstick has been met by the permanent consent for India to reprocess.” The Left had held that the 123 Agreement does not constitute any approval to fuel reprocessing and the US will need to give formal approval for any such measure. The US side has now made clear that they have no intention of giving any permanent right to reprocess. During the PM’s visit last year, it was announced that the consent to reprocess is a matter of a few weeks. It has yet to materialise!


It now appears that all this is linked to India passing a Nuclear Liability Act. For the US side, Condi Rice, Bush’s Secretary of State, had made their interests in the Nuclear Deal clear – the US wants to kick-start its moribund nuclear industry by selling nuclear reactors to India. India is on record wanting to buy 10,000 MW of nuclear reactors from the US suppliers. The US nuclear industry wants the billions of dollars in profits from Indian sales, but does not want any risks: good old risk-free capitalism, US style. This is the genesis of the nuclear liability bill – a hefty subsidy from Indian tax payers for the US to be able to market its reactors.

The full details of the Nuclear Liability Regime is not yet available in the public domain.  The key elements is limiting all liability to about $450 million dollars, the operators liability to be restricted to only Rs 500 crore and no legal liability for the supplier. It can be a contractual arrangement between the operator and the supplier, but not in liability law. The difference between the $450 million limit and the Rs 500 crore limits is the Indian State’s liability; through this legislation, India is also proposing to limit its liability as well.

All this is in direct contradiction to the current law of the land. The Supreme Court in its judgement on the Oleum leak case from Sri Ram Food and Fertilisers in 1987 had made clear that the industry operating hazardous plants had absolute liability including that for environmental damage. The current Bill seeks to reverse this. An upper limit of $450 million makes no sense when we know a nuclear accident can cause billions of dollars in damages. Even the Bhopal case showed that $470 million for the gas victims was totally inadequate. By keeping all liability – including that of the Indian State — capped at $450 million, India will subsidise the nuclear industry at the cost of the Indian people.


The Rs 500 crore limit for operators is well within their insurance cover. By keeping the operators liability so low, Indian government is playing with the safety of the nuclear  plants.

The Indian government is also claiming that the $450 million cap comes from the Vienna Convention on Civil Liability for Nuclear Damage. The Vienna Convention defines the minimum amount of limit of the operator’s liability– it provides a floor and not a ceiling. It also allows countries to operate their own liability regimes. For example, Germany, Japan and Finland all have unlimited liability, the same as current Indian law. The US has a liability cap of $ 10.2 billion through its Price Anderson Act.

The Convention on Supplementary Compensation defines additional amounts to be provided through contributions by States Parties on the basis of installed nuclear capacity and UN rate of assessment.

There are two important aspects of liability that are in the Vienna conventions. One is “strict liability”. This means that the nuclear plant operator is liable for any nuclear event originating from his plant. There is no need to prove negligence, wilful act, etc. The other is that channelled liability – all liability is channelled to the operator and all other parties including suppliers, contractors, etc., bear no liability.

The Price Anderson Act in the US was the first to introduce these conditions. The major reason for introducing the Price Anderson Act was the refusal of the insurance companies to insure the private operators in the United States. A study had shown that a nuclear accident could lead to damages up to 10 billion dollars. The insurance companies needed a cap on their liability in order to provide insurance. The suppliers – GE, Westinghouse, Bechtel, others – had also demanded that they should not be held liable for any such accident.  Other Acts that have similar provisions are in Canada and UK.

However, dozens of countries that operate nuclear power plants have not ratified these conventions nor have passed similar legislation. The Russians and the US have been locked in a dispute precisely because of nuclear suppliers’ liability. The US is insisting that the Russians should sign the Convention on Supplementary Compensation, which protects the nuclear suppliers even from wilful damage. The Russians have till now refused to do so. Most countries also have not passed a Bill similar to what India is proposing to do. Those that have, the limits are much higher than the comparable Indian limits.


Omer F Brown, the key spokesperson for the US nuclear industry, articulated the US position on the need for nuclear liability in India. “Currently, India does not have a nuclear liability law covering its facilities. Therefore, concerns over nuclear liability would be a major impediment to any nuclear trade with India ..Most US nuclear suppliers would not be willing to work in India without nuclear liability protection.”

At an international symposium hosted by the Uranium Institute in 1999 the same lawyer Omer  Brown had made clear why the private nuclear industry, as distinct from the State-run nuclear industry, needs protection from liability laws. “It is important to reiterate the fundamental factor that underlies the concerns of privately owned contractors and suppliers: Private – as distinguished from State-owned – companies have a fundamental obligation to protect the assets of their shareholders ..Private companies are exposed to tort and other liabilities to the full extent of their assets. The greater the assets of a private company, the greater its liability concerns are.”

The record is quite clear. It is the need for protecting the US private nuclear players that is the driver for the proposed Nuclear Liability Bill. This is the subsidy that the Indian State is proposing to pay to the US nuclear industry: all risks, ours, all profits, yours.

Even with this subsidy, the cost of imported reactors from the US is way above that of indigenous reactors – the prices are 3-4 times that of Indian reactors.  But that is a different story. The issue today is that even at this high prices, it is the Indian people who will be at risk. What is on offer is a huge implicit subsidy to the US nuclear industry. This is the crux of the Nuclear Liability Bill on the anvil.