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Govt plans N-revival, focuses on investor concerns

india Updated: Nov 30, 2014 10:21 IST

The Narendra Modi government is working on plans to unshackle the country’s nuclear energy programme by resolving an issue that has frightened away foreign and domestic equipment suppliers alike: The prospect of potentially ruinous payouts in the event of an accident.

Government sources said Prime Minister Modi is understood to have asked his officials for an urgent solution to the problem which has all but neutered the landmark Indo-US nuclear deal of 2008 because equipment suppliers aren’t willing to risk liabilities that could bankrupt them. The law is unusual in that it holds suppliers, and not just the operator, liable if an accident occurs.

Options the government is considering include: Setting up an insurance pool, fixing a limit on reactor components for the purpose of determining liability, and the PM providing a personal assurance that vendors won’t be harassed unnecessarily in the event of an accident.

Ironically, the BJP, which is now in power, found common cause with the Left in rooting for the stringent supplier liability clauses in the Civil Liability for Nuclear Damage Act, 2010. The law was passed before US companies, which were eyeing a big chunk of the Indian market after the N-deal, could make any investments.

Now, the $85 billion civil nuclear programme to increase N-capacity to 63,000 MW from 4,780 MW currently through 30 nuclear reactors is being linked to Modi’s flagship Make in India initiative. US President Barack Obama, due in India in January as chief guest for the Republic Day festivities, would dearly love to see his country investing in the sector.

The insurance pool is proposed to have all stakeholders, both operator and suppliers, contributing to the fund to cover high insurance costs. And size of the fund will depend again on the government’s own contribution, as state-owned Nuclear Power Corporation of India Ltd (NPCIL) is the sole operator of nuclear power plants in the country.

The ministry of finance and the Department of Atomic Energy are working together to give final shape to this proposal. Foreign suppliers, including the American ones, wanted the liability attached to particular components to be fixed so as to ensure that their creditworthiness was not damaged because of the fact that they were operating in India. That is being addressed as well, sources said.

Former chairman of the Atomic Energy Commission, Anil Kakodkar, told HT: “Both domestic vendors as well as international suppliers have been raising concerns about the liability law. Though many proposals are being discussed by NPCIL and the Department of Atomic Energy to address these concerns, I doubt the language in the law would ever make them happy. But all will have to respect the law of the land.”

The latest trigger for the government’s rethink is the unwillingness of even domestic firms to participate in the 2800 MW, Rs. 23,000-crore Gorakhpur nuclear power project in Haryana. Private players like Larsen & Toubro (L&T) and Walchandnagar Industries Limited (WIL) have made no secret of their opposition to the liability law.

“As per international practice entire liability is channelised to operator on no fault basis and suppliers are not held liable beyond a specified limit and value,” said MV Kotwal, wholetime director and president (heavy engineering) at L&T.

“WIL has been a long standing nuclear equipment supplier, helping to build the domestic nuclear power capacity. The equipment are manufactured as per the design of NPCIL and it is inspected & cleared by NPCIL engineers at each stage. In which case, the manufacturer should not even qualify for the liability clause,” said GK Pillai, managing director & CEO of WIL.

NPCIL CMD, executive director in-charge of the media, and TR Arora , project director Gorakhpur project, didn’t respond to email queries from HT and repeated calls to their offices.