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Liability clause could deter equipment firms

delhi Updated: Aug 24, 2010 01:43 IST
Anupama Airy
Anupama Airy
Hindustan Times
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Leading public and private sector suppliers of nuclear equipment, like L&T and BHEL, are unanimously opposed to the move to make them liable for any mishap at a nuclear plant.

Foreign suppliers with tie ups with BHEL with BHEL and L&T — like GE-Hitachi, Westinghouse and Toshiba — have reportedly opposed the move.

This could mean a major roadblock for India’s plans to build nuclear power plants.

Suppliers also fear no insurance company will come forward to give them a policy cover for a period of 60 years, as proposed in the Bill.

Industry bodies FICCI and CII are preparing a representation on behalf of domestic and foreign suppliers of nuclear equipments for submission to the government.

“We are not against sharing the liability but the special clause 17 (b) in the civil nuclear liability bill that calls for claims throughout the operating life of the plant (which is 60 years plus a 20-year claim period) is unjustified and not acceptable,” M.V. Kotwal, director and vice president of L&T told HT.

“If unlimited liability is accepted, it will deter the inflow of the $100-200 billion investment that India expects from its plans to add 63,000 mw of nuclear power by 2032.”

The standing committee suggested modifying the clause to allow recourse whenever “the nuclear incident has resulted as a consequence of latent or patent defect, supply of sub-standard material, defective equipment, design or services, or from the gross negligence on the part of the supplier of the material, equipment, design or services.”

The report also recommended the insertion of the word “and” between the two parts of Clause 17, (a) and (b). The BJP and the Left said inserting 'and' made it mandatory for the operator to enter into an agreement with the supplier for claiming any liability from the latter, diluting the operator’s right of recourse. Subsequently “and” was dropped. The government then changed it to “the nuclear incident has resulted as a consequence of an act of supplier or his employees, done with the intent to cause nuclear damage, and such act includes supply of equipment or material with patent or latent defects or sub-standard services.”

The opposition again took strong objection, arguing the government’s intent was to let suppliers “off the hook.”

Said lawyer Suhaan Mukerji of Amarchand Mangaldas and member of FICCI’s nuclear working group, “The opposition’s stance calls into question an existing operator-supplier liability system that has led to no major nuclear incident for 40 years and which no government has sought to amend.”

Responding to the expanded scope of the article 17 (b) in operators right to take recourse, NPCIL's Thakur wrote that “a review on domestic legislation of different countries reveal that the Operators right to recourse wherever available is limited to willful act or gross negligence by the Supplier”.

He noted that even Article 4 (Rights of Recourse) in the South Korean Act - one of the most stringent in the world and commonly cited during the debate - says the “nuclear operator shall have a right of recourse only insofar as there has been a willful act or gross negligence by the supplier of the materials concerned or by his employees”. The NPCIL official wrote “clearly it is not the same in clause 17 (b).”

In his note, Thakur pointed out that even in the Bhopal tragedy, Union Carbide was held responsible because it was the operator of the factory.

“Same is the case with the Bhopal tragedy, the liability is on Operator (UC), but not on Supplier of the valve which did not function well. This is between the Operator and the Supplier. In the liability regime that came into being after Bhopal disaster, there is no recourse for the operator”, Thakur said.