As India prepares to sign a key agreement with Russia on two new Kudankulam reactors (KK-3 and 4), the PMO has highlighted a fundamental problem with the thorny issue of nuclear liability. The issue not only threatens the future of India’s civil nuclear sector but also India’s relations with key foreign partners such as Russia, US and France.
The government aims to sign the techno-commercial agreement with Russia during Russian President Vladimir Putin’s visit in October. The Cabinet Committee on Security (CCS) is scheduled to clear the deal in the next few weeks. The PMO has sought the law ministry’s view on whether the 2010 nuclear liability law should apply to the new Russian reactors. Under the law, the operator (NPCIL) can pass on the costs of compensation (in case of nuclear accident) to the suppliers if faulty equipment is found to have caused the damage.
This is a key feature of the liability law that riled foreign suppliers as well as the Indian private sector. The government faces a catch-22 situation — if it applies the liability law to the new Russian deal, Moscow will protest. But if it applies the waiver to Russia, it could come under pressure from other suppliers, giving in to which would render the liability law useless.
The 2008 Indo-Russian agreement says no retroactive application of domestic laws would impinge on the deal. So, the 2010 liability law would not apply to Kudankulam 1 & 2 power plants. The Russian government has said the same agreement should apply to Kudankulam 3 & 4 too.
The clause in the Kudankulam agreement was put there by India because of bad history. In the 1970s, the Pokhran tests triggered a round of sanctions against India by some countries. In 1978, the Carter government passed the NNPA, which unilaterally abrogated the Tarapur agreement, causing a historic low in India-US ties. From then, the Indian stand was that international agreements should triumph over retroactive application of domestic laws. New Delhi has maintained the stance through all its nuclear deal negotiations.
Therefore, when Russia insisted on extension of the 2008 agreement, the department of atomic energy agreed. But this is tantamount to giving Russia a special status, as it is believed to go against the principle of “universal application of law”. It could open the government to litigation from domestic suppliers.
Moreover, it leaves India vulnerable to rupture of ties with key nuclear partners, US and France. The French nuclear giant Areva is committed to building six reactors at Jaitapur, Maharashtra.
American companies have already protested against the liability law. After prolonged discussions with India, Westinghouse signed the first early works agreement earlier this year despite the liability law.
Post-nuclear deal, India and US exchanged letters where India made two commitments — first, it would sign and ratify the Vienna Convention on Supplementary Compensation (CSC), and second, India would facilitate the establishment of 10,000 mw of nuclear power capacity by US companies.
Indian companies, who have been suppliers to the Indian nuclear industry for decades, have been worse hit, as they cannot access the necessary insurance to remain in business.
The liability law, with the best of intentions, could kill India’s own nuclear industry.
The government aims to sign the techno-commercial agreement with Russia during Russian President Vladimir Putin’s visit in October. The Cabinet Committee on Security (CCS) is scheduled to clear the deal in the next few weeks. The PMO has sought the law ministry’s view on whether the 2010 nuclear liability law should apply to the new Russian reactors. Under the law, the operator (NPCIL) can pass on the costs of compensation (in case of nuclear accident) to the suppliers if faulty equipment is found to have caused the damage.
This is a key feature of the liability law that riled foreign suppliers as well as the Indian private sector. The government faces a catch-22 situation — if it applies the liability law to the new Russian deal, Moscow will protest. But if it applies the waiver to Russia, it could come under pressure from other suppliers, giving in to which would render the liability law useless.
The 2008 Indo-Russian agreement says no retroactive application of domestic laws would impinge on the deal. So, the 2010 liability law would not apply to Kudankulam 1 & 2 power plants. The Russian government has said the same agreement should apply to Kudankulam 3 & 4 too.
The clause in the Kudankulam agreement was put there by India because of bad history. In the 1970s, the Pokhran tests triggered a round of sanctions against India by some countries. In 1978, the Carter government passed the NNPA, which unilaterally abrogated the Tarapur agreement, causing a historic low in India-US ties. From then, the Indian stand was that international agreements should triumph over retroactive application of domestic laws. New Delhi has maintained the stance through all its nuclear deal negotiations.
Therefore, when Russia insisted on extension of the 2008 agreement, the department of atomic energy agreed. But this is tantamount to giving Russia a special status, as it is believed to go against the principle of “universal application of law”. It could open the government to litigation from domestic suppliers.
Moreover, it leaves India vulnerable to rupture of ties with key nuclear partners, US and France. The French nuclear giant Areva is committed to building six reactors at Jaitapur, Maharashtra.
American companies have already protested against the liability law. After prolonged discussions with India, Westinghouse signed the first early works agreement earlier this year despite the liability law.
Post-nuclear deal, India and US exchanged letters where India made two commitments — first, it would sign and ratify the Vienna Convention on Supplementary Compensation (CSC), and second, India would facilitate the establishment of 10,000 mw of nuclear power capacity by US companies.
Indian companies, who have been suppliers to the Indian nuclear industry for decades, have been worse hit, as they cannot access the necessary insurance to remain in business.
The liability law, with the best of intentions, could kill India’s own nuclear industry.
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