Later this month, after the largest oil spill in history, BP is expected to finally seal its leaking well in the Gulf of Mexico. It is ironic that the Indian Parliament is scheduled to take up the Civil Nuclear Liability Bill at the same time.
The Deepwater Horizon disaster should remind us that a failure to adhere to the highest standards of safety can cause advanced technology to break down with devastating consequences.
However, the Bill — as it is currently designed — does nothing to encourage safe behaviour and, in fact, provides perverse incentives to operators and suppliers of nuclear plants to cut costs at the expense of safety.
The mainstream debate on the Bill has skirted its safety implications. The Bill has attracted criticism because it violates the tenets of natural justice; an accident at a nuclear plant can cause hundreds of billions of dollars of damage but the Bill — even with the revision suggested by the parliamentary committee — caps the liability of the company operating the plant at a fraction of that amount. Second, the Bill indemnifies the supplier of the plant. This clause was adopted under US pressure to ensure that American nuclear suppliers wouldn’t be held responsible even for accidents that resulted from a design flaw.
These clauses are manifestly unfair but the government claims that we must accept them because the Bill is necessary for the implementation of the nuclear deal. However, these modalities will also have an adverse impact on the safety of nuclear installations in India.
First, consider the liability cap. The new proposed liability cap of R1,000 crore is a small fraction of the cost of a modern nuclear plant. For example, each reactor at the Jaitapur complex in Ratnagiri district of Maharashtra is anticipated to cost R30,000 crore.
Now, what if a company finds that it needs to spend 10 per cent more on a plant to fix a safety problem? Would it rather spend R3,000 crore immediately or take the risk of paying R1,000 crore at some point in the future? This example is simplified but the principle is robust: a liability cap that is so much smaller than the cost of a new plant provides no financial disincentive for unsafe behaviour.
Second, the indemnity provided to the supplier means that its job is done once it has persuaded the regulatory authority, by whatever means, of the safety of its design. In particular, if fresh safety concerns come to light after the plant has been sold, the Bill provides no incentive for the supplier to share this information with the operator.
This was an important factor in the accident at Three Mile Island in Dauphin County, Pennsylvania. The Kemeny Commission, appointed to study the accident by former American President Jimmy Carter, pointed out that “a senior engineer of the Babcock & Wilcox Company (suppliers of nuclear steam system) noted in an earlier accident, bearing strong similarities to the one at Three Mile Island, that operators had mistakenly turned off the emergency cooling system... [and] urged, in the strongest terms, that clear instructions be passed on to the operators. This memorandum was written 13 months before the accident at Three Mile Island, but no new instructions resulted from it.”
Can the Bill be reformed? Here are three minimal suggestions. The cap on liability should obviously be done away with. Second, following well-established norms in tort law, the Bill should ensure that the liability for an accident is ‘joint and several’ between the operator and the supplier. Under this kind of liability, the victim could collect all the compensation due to her from either party.
For example, the victim could choose to collect from the supplier, which would then have to sue the operator to recoup its losses if it felt that it had overpaid. Finally, the Bill should codify the notion of absolute liability that was laid down by the Supreme Court in 1986.
The court ruled that “where an enterprise is engaged in a hazardous... activity and harm results to anyone on account of an accident... the enterprise is strictly and absolutely liable to compensate all those who are affected.” Moreover, “it should be no answer to the enterprise to say that it had taken all reasonable care and that the harm occurred without any negligence on its part.”
The right way to think of nuclear liability legislation is as a three-way conflict of interest. The possibility of an accident endangers potential victims but also means that the operator and the supplier of the plant might have to pay large amounts in compensation. In future nuclear commerce, the supplier is likely to be a large multinational corporation; the operator, a public sector company perhaps in partnership with a big domestic corporation; and the victims, the inhabitants of the rural areas where nuclear plants are commonly built.
The current Bill is designed to indemnify the multinational corporation, limit the liability of the domestic company and allow the victims to bear the brunt of a nuclear accident. Are these the interests that the Manmohan Singh government represents?
M.V. Ramana and Suvrat Raju are physicists at Princeton University, New Jersey and the Harish Chandra Research Institute, Allahabad, respectively The views expressed by the authors are personal