Clearing the air on the understanding reached with the US recently on Civil liability for Nuclear Damage (ClND) Act, the Union Government on Sunday said that the operator of a plant shall be liable for damage in case of a nuclear accident. This means foreign suppliers or manufacturers of equipment used to build reactors will not be directly liable for damages and the victims cannot sue them. However, the operator can claim damages from suppliers, if the contract between two so stipulates.
It was clarified that the liability of the operator shall be strict and be based on the principle of no fault liability. So, the operator, before starting operation of the N-plant has to take out an insurance policy covering liability. The Government also made it clear that there was no proposal to amend the ClND Act or the rules.
The Ministry of External Affairs (MEA), which released details of the understanding reached with the US recently, said the understanding on the policy hurdles was reached after three rounds of discussions between the India-US Nuclear Contact Group, which met last in london, just three days before US President Barack Obama’s arrival on January 25.
“Based on these discussions, an understanding was reached with the US on the two outstanding issues on civil nuclear cooperation, which was confirmed by the leaders (Prime Minister Narendra Modi and Obama) on January 25, 2015,” the Ministry said.
The MEA said during the course of the discussions in the Contact Group, the Indian side, using case law and legislative history, presented its position concerning the compatibility of the ClND Act and the Convention on Supplementary Compensation for Nuclear Damage (CSC). The idea of the India Nuclear Insurance Pool, as a part of the overall risk-management scheme for liability, was also presented to the US side which clicked well with them and there was a general understanding that Indian ClND law was compatible with the CSC, which India has signed and intends to ratify.
While asserting that the ClND Act “channels all legal liability for nuclear damage exclusively to the operator”, the MEA said that concerns over the broad scope of Section 46, pertaining to possible actions under other laws, have been raised by both domestic and foreign suppliers.
However, it was clarified to them that this section does not provide a basis for bringing claims for compensation for nuclear damage under other Acts. On Friday, India gave a Memorandum to the US assuring this.
MEA spokesperson Syed Akbaruddin rejected the suggestion that there was a provision for bilateral safeguards given to the US on the tracking of the nuclear material. “There will be no bilateral safeguards. Our approach is consistent with our practice and our international legal obligations. Nuclear material obligated to the US and other civil nuclear cooperation partners will remain under IAEA safeguards (as per India’s agreement with the international agency),” he said.
The Ministry also rejected suggestions that there was no ‘right of recourse’ for an operator against foreign suppliers, saying the Section 17 of ClND provides right of recourse. “As a matter of policy, NPCIl (Nuclear Power Corporation of India ltd.), which is a public sector undertaking, would insist that the nuclear supply contracts contain provisions that provide for a right of recourse consistent with ClND Rules of 2011,” MEA said.
MEA also justified setting up of the insurance pool of Rs 1,500 crore and rejected the contention that all the financial burden of the compensation was passed to the tax payer. There are about 26 insurance pools operating around the world in countries such as France, Russia, South Africa and the US. The India Nuclear Insurance Pool has been instituted to facilitate negotiations between the operator and the supplier concerning a right of recourse by providing a source of funds through a market-based mechanism to compensate third parties for nuclear damage. It would enable the suppliers to seek insurance to cover the risk of invocation of recourse against them.
The ClND Act already requires NPCIl (Operator) to maintain a financial security to cover its maximum liability for civil nuclear damage (Rs 1,500 crore), the MEA said. With the India Nuclear Insurance Pool (INIP), a market based international best practice will be followed and the NPCIl will take out insurance under the Pool for the same amount and just as it pays an annual fee now it will pay an annual insurance premium to the Pool. The Government will make available Rs 750 crores to the Insurance Pool for the first few years till the insurance companies are able to maintain it on their own.
India’s liability law also provides that the Central Government may establish a “Nuclear liability Fund” by charging such amount of levy from the operators. Officials said the move may result in a nominal increase of 2 to 5 paise per electricity unit to the consumer.
On maximum amount of liability in respect of each nuclear incident shall be the rupee equivalent of 300 million Special Drawing Rights (SDRs). “As the current value of 1 SDR is about Rs 87, three hundred million SDRs are equivalent to about Rs 2,610 crore. Section 6(2) of the Act lays down that the operator’s maximum liability shall be Rs 1,500 crore. In case the total liability exceeds Rs 1,500 crore, as per the ClND Act, this gap of Rs 1,110 crore will be bridged by the Central Government. Beyond Rs 2,610 crore, India will be able to access international funds under the CSC once it is a party to that Convention,” MEA explained.