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October 30, 2012, The Hindu

    M. V. Ramana
    Suvrat Raju
BEYOND MEGAWATT: Making the operator and supplier share liability is not only fair but crucial from the point of view of cover.
Photo: AP BEYOND MEGAWATT: Making the operator and supplier share liability is not only fair but crucial from the point of view of cover.

The question that must be asked, is whether India is willing to compromise on its laws and the safety and rights of its citizens to protect the business interests of reactor suppliers

In 2010, under pressure from multinational nuclear suppliers, the Manmohan Singh government pushed through a law to protect them from the consequences of a nuclear accident. The law makes it impossible for victims to sue the supplier, even for an accident that results from a design defect. Liability is effectively transferred to the Indian taxpayer, first to the public sector Nuclear Power Corporation of India Ltd. () and then the government. Even this is capped at a maximum of Rs.2,500 crore and victims need not be compensated for any additional damage.

However, the law also includes a clause that, under certain circumstances, allows the NPCIL, although not the victims, to sue the supplier and recoup the money it has paid out. It is this relatively minor clause that nuclear suppliers, and their friends in the Indian establishment, have been railing against for the past two years.

The Russian Deputy Prime Minister warned , on his recent visit, that if the Russian company Atomstroyexport (a subsidiary of Rosatom) was forced to obey this law, then the cost of power from the Kudankulam third and fourth reactors would go up. He must have been hoping that no one would try and square this threat with earlier claims of safety made about these plants.

In a paper, published by “Nuclear Engineering and Design” in 2006, three NPCIL officials claimed that, in any given year, the probability of a severe accident at these plants was one in 10 million. If Atomstroyexport can persuade insurers that this figure is correct, then to obtain cover even for accidents where the highest possible liability of Rs.2,500 crore is applicable, it would need to pay a premium of only about Rs.2,500 per year. For the 1,000 MW Kudankulam reactors, operating at an 80 per cent load factor, this should lead to an increase in tariff of about a third of a millionth of a rupee per unit!

This absurdly low figure arises because both the factors in the calculation earlier make little sense. As preliminary data from shows, a nuclear accident can cause economic damage that is more than a hundred times larger than the artificial cap on liability in the Indian law. Moreover, empirical evidence — in a total of about 15,000 reactor-years of operation, there have been several “core-damage” accidents including Fukushima, Chernobyl and Three-Mile Island — suggests that the probability of severe accidents is about a thousand times higher than what the industry claims.

Suppliers have successfully wielded their influence in other countries to avoid economic liability for accidents. Their argument that the Indian law will lead to cost escalations is meant to veil the real reason for their worry: the law sets a bad precedent and, in the future, either in India itself or in another country, it may lead to a more rational law centred on victims rather than the industry. In such a law, there would be no cap on liability, and suppliers would be held jointly responsible with the operator for paying out damages.

In fact, the Supreme Court has already admitted a petition, by the lawyer Prashant Bhushan, requesting precisely these changes in the law. Making the operator and supplier share liability is not only fair but crucial from the point of view of safety.

Design and accidents

The history of nuclear power shows that design failures have played an important role in all severe accidents. This is true of Fukushima, where the underlying problems with the Mark 1 design had been recognised many years earlier. The Kemeny Commission, set up by Jimmy Carter, to analyse the Three Mile Island accident pointed out that the suppliers, Babcock & Wilcox, shared culpability. The disaster at the Chernobyl reactor, which was built by the Soviet predecessor of Rosatom, was caused by a combination of two grievous design features: a positive “void coefficient of reactivity,” and the lack of appropriate containment.

Apart from the untenable claim about higher tariffs, nuclear suppliers and the Indian government have made other disingenuous arguments to get rid of the clause on supplier liability. One of them is that the law is hurting India’s domestic manufacturers, some of whom are involved in supplying small parts of the plant.

In general, as in other industries, exposing all manufacturers along the supply chain to tort claims helps make them more conscious of safety and quality. Manufacturers who are supplying parts to a hazardous industry need to be more careful about reliability.

Nevertheless, the law does not, as such, prevent the NPCIL from signing subcontracts that indemnify smaller suppliers along the chain. The NPCIL’s problem is that it is politically infeasible to extend this indemnity to the manufacturer of the plant itself, as it discovered when it tried to provide blanket indemnity to Atomstroyexport for the Kudankulam third and fourth units.

Industry on Indian law

The nuclear industry also argues that India’s current law is out of sync with international conventions on nuclear liability. This is a poor argument because these conventions were all drafted under pressure from nuclear manufacturers who, historically, were in a stronger position than they are now. In the early days of nuclear power, American suppliers exploited this to impose the idea that liability should be channelled to the operator. Later, suppliers from other countries also adopted this self-serving argument.

Until recently, the United States itself never joined any international liability convention, because under its domestic law, called the Price Anderson Act, victims retain the right to sue suppliers. Economic compensation is channelled through a complicated insurance system, but manufacturers can be found legally liable and this has consequences.

In 1997, the U.S. engineered the Convention on Supplementary Compensation for Nuclear Damage (CSC), with a special rider for itself. When Bush communicated the convention to the U.S. Senate for ratification, he emphasised that “The in particular benefits from a grandfather clause that allows it to join the convention without being required to change certain aspects of the Price-Anderson system that would otherwise be inconsistent with its requirements.”

India’s own law is largely borrowed from an annex of the CSC. After showing no inclination to join any of the existing treaties for half a century, the Indian government rushed to sign this discriminatory convention soon after the Indo-U.S. nuclear deal. This shows that it was acting under external pressure, and not out of any concern for potential victims.

Even granting that suppliers should be liable in principle, many well-meaning people argue that India must acquiesce to the demands of the industry because it desperately needs electricity. Leaving aside the debate on the role of nuclear power in general, it is clear that India’s push towards importing reactors has less to do with electricity, and more to do with other factors.

Kakodkar article

Even by the standards of UPA II, the process of handing out multi-billion dollar contracts for reactors to various multinational companies has been opaque and arbitrary. In Jaitapur, the government has promised to buy up to six European Pressurised Reactors (EPR) from Areva. No EPR is in commercial operation anywhere in the world and in France and Finland, Areva is running into severe construction-difficulties. Two nuclear complexes have been promised to the U.S., again involving designs that have never been built before.

In a rare candid admission, the former chairperson of the Atomic Energy Commission, Anil Kakodkar, provided the rationale behind these seemingly bizarre decisions.

Writing in the Marathi daily Sakaal, in January 2011, Kakodkar explained: “America, Russia and France were the countries that we made mediators in the efforts to lift sanctions, and hence, for the nurturing of their business interests, we made deals with them for nuclear projects.”

As the debate on liability continues both in public and in the courts, the question that the country must ask is whether it is willing to compromise on its laws, and the safety and rights of its citizens to protect the business interests of reactor vendors.

(The authors are physicists.)


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