Why India Wants To Overhaul Its Nuclear Liability Law

As India plans to go big on nuclear power production, the long-standing debate on its ‘liability law’ has again come to the fore. Global collaborations with countries like France and America to attract foreign investments in India’s nuclear sector have been on hold. For over a decade, the debate still continues: “who will be responsible for compensation in case of nuclear disasters?”

While India’s nuclear liability law places primary responsibility on the operator (the corporation that runs a nuclear installation), it also includes a right of recourse against the supplier (any entity that supplies or manufactures material for components used in a nuclear power plant) under certain conditions.

This provision has made foreign suppliers wary of investing in India’s nuclear sector because international liability frameworks exempt suppliers from direct financial responsibility. However, the Indian government, in budget 2025, proposed amendments in its liability law to give nuclear power a push amid rising demand of power for AI, data centres, and green transition.

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Law Governing India’s Nuclear Liability

The aim of enacting laws for civil nuclear liability is to ensure that the compensation is available to the victims of nuclear disasters like Fukushima which took place in Japan. In 1997, the Convention on Supplementary Compensation (CSC) was introduced to finalise a minimum national compensation amount. If the amount is not sufficient for survivors, it can be increased through public funds to cover the damage caused by the nuclear incidents.

Even though India was a signatory to the CSC, the Parliament gave formal consent to the treaty in 2016. And in 2010, the country also enacted the Civil Liability for Nuclear Damage Act (CLNDA) to ensure speedy compensation for victims of a nuclear accident.

According to CLNDA, 2010, the operator of the nuclear plant is liable to cover damage through insurance or other financial security up to Rs 1,500 crore. If the damage claim exceeds Rs 1,500, the government needs to step in to cover the extra cost of compensation. However, the government’s liability is capped at around Rs 2,300 crore. In addition, the Act also sets a time limit for when the operator must provide compensation.

However, the Indian law isn’t restricted to operators; it also allows them to take compensation from suppliers too under certain conditions. As per Section 17(b) of CLNDA, after paying their share of compensation, the operator shall have the right to recourse where the “nuclear incident has resulted as a consequence of an act of supplier or his employee”. This includes sub-standard services, defects in the supply of equipments, and more.

The lawmakers included a supplier liability clause after recognising that defective parts were partly responsible for industrial disasters in the past, like 1984 Bhopal Gas Tragedy which killed thousands and left lakhs of survivors with its haunting scars.

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Supplier Liability Clause Is An Issue

For foreign as well as domestic suppliers, India’s nuclear liability law is an issue because it is the only country where suppliers can be asked to pay for damages. They are concerned about potentially getting exposed to unlimited liability under the CLNDA. On the other hand, the international legal framework on nuclear liability says that the compensation amount will only be borne by the operator and no other person.

The governments and companies used to say that holding suppliers accountable for accidents can make their business unsustainable. Hence, most of the countries placed the responsibility solely on the operators.

In short, suppliers have raised concerns about two key provisions in the Indian law --- Section 17(b) and Section 46. Under the CLNDA, Section 17(b) goes against the law’s main goal of responsibility of compensation to operator. And Section 46 could allow civil lawsuits against not just the operator but also suppliers. These provisions have become problematic for foreign suppliers of nuclear equipments to enter the Indian market.

For instance, the Jaitapur nuclear project in Maharashtra has been stuck for more than a decade. Originally, the MoU was signed in 2009 with France’s Areva (predecessor of EDF). Then in 2016, EDF and NPCIL again signed the contract and in 2018, they both inked an agreement on the “industrial way forward”. The French company also submitted its techno-commercial offer for the construction of six nuclear reactors in 2020. However, India’s nuclear liability law was still an issue. Since then, many rounds of discussions took place, but there is no conclusion.

Similarly, another nuclear power project which was proposed in Andhra Pradesh’s Kovvada have also been delayed. So far, India has signed various nuclear deals with the United States, France, and Japan. But India has global only with Russia as it predates the nuclear liability law.

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Proposed Amendments May Pave The Way

In the Budget 2025-26, Union Finance Minister Nirmala Sitharaman announced to allocate Rs 20,000 crore for research and development (R&D) in small modular reactors (SMR) and operationalise at least five indigenously developed SMRs by 2033. The nuclear power holds greater importance in the government’s green agenda.

The intention is reflected in the Centre’s intention to amend the Indian Atomic Energy Act and Civil Liability for the Nuclear Damage Act to include private sector participation. The government has set the target of reaching 100 GW nuclear energy capacities by 2047 under the nuclear energy mission.

Currently, India’s nuclear power capacity stands at 6,780 MW, comprising 22 reactors. To meet this target and compete with top countries producing nuclear power, India needs to speed up the construction of new reactors, attract foreign investment, and streamline regulatory frameworks to ensure safety and efficiency in expansion.  

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Other countries have also begun to embrace nuclear power again to meet their net zero targets.  Since large modular reactors pose safety concerns, small modular nuclear reactors are increasingly developed by countries. Big tech companies like Google, Amazon, Microsoft, and others have also started leveraging nuclear energy to power their data centres.

The need for nuclear power is set to rise as more data centres are being established across India, leading to increased private-sector investments. While the world has picked up pace in embracing the forgotten source of non-fossil fuel energy, India has a long way to go. If the government continues to support the technology, nuclear energy will take the centre stage in India's energy mix across sectors.