Q+A - Nuclear commerce liability bill
The Lok Sabha approved on Wednesday a bill to open up the country's $150 billion nuclear power market after the government agreed to tougher accident liability provisions and higher compensation.delhi Updated: Aug 25, 2010 19:40 IST
The Lok Sabha approved on Wednesday a bill to open up the country's $150 billion nuclear power market after the government agreed to tougher accident liability provisions and higher compensation.
Here are some questions and answers on the bill, which has still to be ratified by parliament:
WHAT IS THE BILL?
A civil nuclear agreement between India and United States in 2008 ended New Delhi's isolation in global atomic commerce and opened up its state-controlled nuclear power market to foreign firms.
But the deal could not be implemented until India put in place a compensation regime that limited the liability of private companies, especially those from the United States, in the event of an industrial accident.
So India framed the Civil Liability for Nuclear Damage Bill 2010, which stipulates the compensation burden on the state-run reactor operator, the liability of the federal government and the responsibility of private suppliers and contractors.
WHY IS THE BILL IMPORTANT?
The bill is important for private companies whose liabilities are not underwritten by their governments, as is done by the governments of Russia and France.
Compensation claims from one nuclear accident could be enough to bankrupt a private company. Firms are reluctant to enter the Indian market despite its size until there is some clarity on compensation in case of an accident.
WHY IS THE BILL CONTROVERSIAL?
Critics say the original draft law pegged the compensation liability of the operator too low -- at about $110 million, almost 23 times less than that of an operator in the United States.
It also did not hold private suppliers liable, opening a debate on whether the government was allowing them to get off easily in case of an accident.
But the Bharatiya Janata Party agreed to back the bill after the government trebled the compensation liability of the operator and extended the liability to cover private suppliers.
HOW MUCH COMPENSATION IS BEING OFFERED?
Following opposition to the bill's original draft, the government referred it to a special parliamentary panel.
The panel recommended the liability cap for the operator be trebled to $320 million, a suggestion largely backed by the opposition.
State compensation, or the liability burden on the federal government, has been pegged at the equivalent of 300 million IMF special drawing rights ($450 million) which will be over and above the operator compensation.
The panel has also suggesting extending the liability to cover private suppliers and contractors.
WHICH FIRMS WILL BENEFIT AND AT WHAT COST?
The main beneficiaries could be firms such as US-based General Electric and Westinghouse Electric, a subsidiary of Japan's Toshiba Corp.
They already lag Russian and French firms, which have moved ahead on building reactors in India. While higher compensation would mean firms would have to shell out more for insurance premiums, a formal compensation regime will bring in much-needed policy clarity which will help speed up projects.
Once the bill becomes law, the US firms can start work on building reactors at at least two sites identified for them. The first fruits of the India-United States deal could fetch GE and Westinghouse up to $10 billion.
The Confederation of Indian Industry, a business lobby, said the bill would keep away domestic and foreign suppliers because of the stiff provisions against private firms.
"Globally, there is no insurance coverage available for suppliers in the nuclear business," CII wrote in a letter to the government, which was released to the press on Wednesday.
"This will stall the growth of the nuclear manufacturing industry in India and be a setback for the government's plan to indigenise maximum supplies for the foreign technology plants."
ANY OTHER HURDLES REMAIN?
Yes, problems over acquisition of land for nuclear power plants could delay projects. Farmland acquisition has highlighted a broader standoff between industry and farmers in a country where two-thirds of the population lives on agriculture.
There have already been several farmers' protests against upcoming nuclear reactors and opposition support for such demonstrations will complicate the land acquisition process.