Regional Reactor Sales in India – Prospects and

Problems

- M O H I T A B R A H A M ,

- P A R T N E R , P X V L A W P A R T N E R S ,

- C H A I R , L I A B I L I T Y W O R K I N G G R O U P , N U C L E A R L A W A S S O C I A T I O N O F I N D I A

- E M A I L : M O H I T . A B R A H A M @ P X V L A W . C O M

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POWER ALLOCATION IN INDIA

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Nuclear Others

ELECTRICITY DEMANDS

• India is the 4th largest economy in the world.

• India has the 2nd largest GDP amongst developing countries based on purchasing power parity.

• Buoyant economy – growth still expected to be in the region of 7-8%.

• Availability of electricity a key factor in sustaining growth.

• 5th largest electricity generation capacity in the world – over 1,90,592 MW.

• Worlds 3rd largest transmission and distribution network.

• Country continues to suffer from massive demand-supply gap particularly during peak hours.

• 8-10 hours of “load shedding” even in industrialised states. July ‘12 power grid failure – affected over 600 million people.

• Great scope for nuclear power – potential value of sector in India at USD 150 Billion.

NSG – EXEMPTIONS TO INDIA• As a nuclear weapons country, India was excluded from the Nuclear Non-

Proliferation Treaty – hence excluded from the nuclear trade by the Nuclear Suppliers Group (NSG).

• India could join NPT only if it disarmed and joined as a Non-Nuclear Weapons State – politically impossible.

• Owing to an impeccable record of nuclear non-proliferation and strategic economic considerations, India was afforded a clean waiver.

• IGAs with France (Sept. 2008), Russia (Dec. 2008) and the US (Oct. 2008)

• India – Specific Safeguards Agreement signed in Feb. 2009. Additional protocol signed in May 2009.

• Agreements also signed with Canada, Kazakhastan, UK, South Korea, Mongolia, Australia, Argentina. Negotiations on with Japan and EU.

• Recognition that India has no obligation from treaties and arrangements to which it is not party (NPT, CTBT, etc.) and the importance of India having assured fuel supplies.

• All agreements for peaceful purposes, but do not affect India’s unsafeguarded nuclear activities.

NUCLEAR ENERGY IN INDIA

• As of today• About 3-4% of the total electricity produced (approx. 4800 MWe)• Fully indigenous PHWRs• Active collaboration with Russia on Kudankulam NPP (2*1000 MWe)

– possible to upscale to another 2*1000 MWe).

• The Future• NSG exemptions resulted in about 17% increased outputs in

existing plants. Uranium already imported and used in existing PHWRs.

• High capacity reactors for imports being negotiated with France, US, Russia, Germany and others.

• JV with AREVA and NPCIL for 6*1000 MWe in implementation phase.

• DAE projects – 30000 MWe by 2020 and 60,000 MWe by 2032.

CIVIL NUCLEAR LIABILITY LAW• The Civil Liability for Nuclear Damages Act, 2010 and the Rules, 2011.

• Background – Bhopal Gas Tragedy (Union Carbide), 1984.

• Many features of the Act similar to the Convention on Supplementary Compensation for Nuclear Damage, 1997 (CSD) – India has signed but not ratified.

• Liability Caps• NPPs equal to or > than 10 MWe – about USD 330 Million.• Spent fuel reprocessing plants – about USD 66 Million.• NPPs < than 10 MWe, fuel cycle facilties, transportaion of nuclear material, etc. –

About USD 22 Million.• Anything over the above caps would be paid by the Government subject to a limit of

300 Million SDR (about USD 450 Million)

• Sufficient ? Union Carbide paid over USD 1 billion for the Bhopal Disaster.

• Some significant departures from the CSD• While primary liability is on the operators (NPCIL, BHAVINI – both state owned

entities), operators may claim a right of recourse in some situations against the supplier.

• Section 46 – Act is supplemental – other laws to also apply. Therefore, opening suppliers to actions in Tort, other environmental laws and even criminal liability.

SUPPLIER LIABILITY – CHANGING INTERNATIONAL NUCLEAR LIABILITY

JURISPRUDENCESection 17:

“ The operator of the nuclear installation, after paying the compensation for

nuclear damage..shall have a right of 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;

(c) The nuclear incident has resulted from the act of commission or omission of

an individual done with the intent to cause nuclear damage”.

• Exact reproduction of Article 10 of CSC except sub clause (b).

SUPPLIER LIABILITIES - AMBIGUITIES

• To mollify international community, the government introduced Rule 24

“ (1) A contract referred to in clause (a) of section 17 of the Act shall include a provision

for right of recourse not less than the extent of the operator’s liability or the value of

the contract itself, whichever is less;

(2) The provision for the right of recourse referred to in sub-rule (1) shall be for the

duration of initial license issued under the Atomic Energy (Radiation Protection)

Rules, 2004 or the product liability period, whichever is longer.”

• Does not refer to situations in Section 17(b).

• Serious ambiguity – no supplier, Indian or foreign happy.

• Price escalation – Russian Government and Kudankulam 1,2,3 and 4.

• Other countries opposed to supplier liability. GE-H, Westinghouse, Areva, sought changes to the law.

• Westinghouse says it will await India’s ratification of the CSC before offering to supply equipment to India.

• Activist Indian Judiciary.

A PRO-PEOPLE LEGISLATION?

(Pic: Courtesy, the Hindu, A. Shaikhmohideen

PUBLIC PERCEPTIONS• Major protests at Kudankulam and Jaitapur (site of Areva project).

Some NGOs believe that apparent limits on liability of supplier unacceptable.

• Hunger strikes, storming of NPP, police strong handedness in combating protests. Pending PIL against Act and Rules in Supreme Court.

• Significant change in India’s civilian nuclear power policies post 2008. Earlier NPPs set up in the 80s and 90s near major cities like New Delhi and Chennai witnessed no protests – Why?

• Lack of public awareness and engagement with the people on the issue of nuclear power.

• Sudden engagement compounds fears – an example of Kudankulam.

• Many fears arising out of misinformation – Indian government alleges NGOs of certain countries intentionally spreading misinformation.

THE WAY FORWARD• Ambiguities regarding supplier liability have to go – Government must bite the

bullet one way or the other.

• Politically, very difficult to remove supplier liability altogether, but clarity would help. Suppliers can then determine the extent of liability, have price negotiations and take out insurance.

• Insurance pools – needs to be created. Presently no nuclear insurance pool in India due to restrictions on inspection of facilities by international pools.

• Contractual negotiations on supplier liability must be encouraged. Can the Indian government contractually waive its right of recourse against a supplier?

• Generation of positive public opinion and detailed engagement with the public.

• Tremendous potential for exploiting Nuclear energy in India. India can be an exporter of reactors. Massive potential yet to be tapped.

• The future – Regional SAARC based cooperation? Proposal by M.P. Ram Mohan, Chairman, Nuclear Law Association, India.

Thank You