India: Nuclear Power Projects In India And Liability Issues

Last Updated: 3 December 2009
Article by Sumeet Kachwaha

First Published in Construction Law International, Volume 5, Issue 1, March 2010.

[Transcript of talk delivered on 5th October 2009 at Madrid on the occasion of the International Bar Association Annual Conference]

My talk is in two parts. In the first part I propose to give a bird's eye view of our nuclear and power sector. In the second part I would like to talk about India's nuclear liability regime.

Part I

Current Power Situation:

On paper we are the 5th largest producer of electricity in the world. Our transmission and distribution system is the 3rd largest in the world. But these are misleading figures. In reality India has one of the lowest per capita power consumption in the world i.e. a mere 700 KW per annum. The transmission and distribution losses are about 40%. Power outrages are common with 16% shortfall at peak demand time.

The chronic power shortage India has faced over the decades has significantly impacted its GDP.

Coming to the nuclear sector: India has a unique position in the array of nations with nuclear capabilities. Our nuclear capabilities go back over five decades but our civil nuclear programme could not progress beyond a point. This was essentially because India did not become a party to the Non-Proliferation Treaty of 1970 (NPT). India could not become a member of the NPT because it exploded a nuclear device in 1974 and accordingly did not qualify as a Nuclear Weapon State under the NPT (under the NPT only countries which had weapon capability before 1970 were accorded the status of Nuclear Weapon State). It became politically impossible for India to sign the NPT because it would have to disarm its defence nuclear programme and join as a Non-Nuclear Weapon State. Further India considered the treaty discriminatory and unequal. However sitting out of the NPT cost India dearly because it got excluded from world nuclear trade. It had to largely do without technical or fuel assistance from other countries. Absence of fuel specially impacted India significantly because our indigenous resources of uranium are very modest.

Thus India desperately needed to get back into the nuclear family fold. The break through came on 2nd March 2006 when India and US signed a civil nuclear co-operation agreement. This paved the way for India entering into a safeguards agreement with the International Atomic Energy Agency (IAEA). In short India agreed to separate its civil facilities from its military facilities and subject its civil facilities to IAEA inspections and safeguards. India agreed to continue its unilateral moratorium on nuclear testing and not indulge in nuclear proliferation (something which it has never been accused of). In return, the 45 nations Nuclear Suppliers Group (NSG) granted a waiver to India allowing it to enter into nuclear commerce with other countries. This dramatic development ended a 34 year old moratorium on nuclear trade with India and made it the only country with nuclear weapon which is not a party to the NPT but is still allowed to carry out civil nuclear commerce with the rest of the world.

Current situation:

As on date India has about 15 small reactors and two mid-sized reactors (total 17 reactors) which together have a capacity of about 4120 MGW of electricity. In reality however most of our plants have been working significantly beneath their capacity (ranging from 50% to 85%). Currently, we have six nuclear power projects under construction which will add 3100 MW to our existing 4120 MW. Further the new projects which are planned till 2020 would total another 14000 MGW. This would make our cumulative capacity by 2020 at over 21000 MGW. This figure may look aggressive but our Prime Minister has gone on record to state that the target of 14000 MW by 2020 is capable of being far exceeded with India's entry into the Global arena. Even this target (of 14000 MGW) would translate into a vast business opportunity of US$ 80-100 billion.

At present the nuclear power projects account for only 2.78% of our total generating capacity. How important our nuclear power projects are can be gauged from the fact that our long term target is to generate 25% of our total electricity from nuclear sources.

Future trends:

The first trend is that India will intensify focus on fast breeder reactors. This is necessary as we have very modest reserves of uranium. Fast breeder reactors would cut short the need for natural uranium by 2/3rd. This would make the projects commercially viable. Connected with India's shortage of uranium in the 2nd trend and that is India's likely shift of focus towards thorium based reactors. While India does not have much uranium it has about 25% of the world's known thorium reserves. Therefore it is quite logical for India to focus here. India has already uniquely been developing a nuclear fuel cycle base on thorium.

In fact experts see India emerging as a leader in fast breeder reactor technology and thorium based nuclear fuel technology. Experts also see India emerging as a centre for meeting global demand for nuclear equipment. This is since it is envisaged that when foreign participants come to India, the Indian Government will mandate transfer of technology and indigenization of equipment manufactured. This would lead to joint ventures in India and transfer of technology to them and ultimately these joint ventures would cater not only to the Indian demand but global demand for nuclear equipment.

Nuclear Commerce already underway in past year:

Before I conclude the first part of my presentation I may briefly touch upon the nuclear commerce which has already taken place since we got the NSG waiver on 6th September 2008:

(i) On 30th September 2008, India and France signed a nuclear Civil Co-operation Agreement. Upon this the French major Areva has shown keen interest in India. It has entered into fuel supply agreement and MOUs with an Indian Government Company for setting up minimum 2 maximum 6, European Pressurized Reactors of 1650 MW each including life time fuel supply for these reactors.

(ii) An Indian engineering company called Larsen & Toubro has signed an MOU with US based Westing House Electric Company to manufacture nuclear power reactors.

(iii) On 5th December 2008, Russia and India signed a Civil Nuclear Co-operation Agreement. The Russian State controlled company (AtomStroyeksport) has firmed up deals for 4000 MGW nuclear reactors in addition to two that are already being constructed by them.

Besides, several fuel supply agreements have been entered into - with Areva, the Government of Kazakhstan and most recently (about a month back) with the Government of Namibia (Namibia is reported to have some of the best quality of Uranium in the world) and they have entered into a civil nuclear co-operation agreement with India on 31st August 2009. However many corporations and more specifically the US based corporations are going slow because India has not yet in place a nuclear liability regime.

Part II

India is neither a signatory to any relevant International Convention on nuclear liability, nor has it any domestic legislation in place on the subject. How important it is, specially for US companies that there should be such a legislation in place can be gauged from a statement from GE Energy: "the liability issue is a biggest remaining hurdle" for US companies to participate in India's nuclear commerce as plant operators or as equipment suppliers. This was stated at the time when US Secretary of State, Ms. Hillary Clinton was to visit India in July end. In fact to push for such legislation was amongst the agendas of her visit. A senior US Government official at that time stated: "we are hoping to see action on nuclear liability legislation that would reduce liability for American companies and allow them to invest in India".

However simple or straightforward it may seem at surface to have such legislation, this issue is very sensitive and explosive and has political and legal ramifications. In order to understand this better one needs to put the clock back by almost 25 years. In 1984 India had the unfortunate experience of having to face the worst industrial disaster ever, namely the Bhopal gas leak case which occurred in the city of Bhopal through a US controlled Company namely Union Carbide. This disaster led to thousands of people being killed and many more being injured. The activists and NGOs which came together then are still very much active. The issue is thus sensitive and politically charged. It is ripe for exploitation by political parties which can whip up sentiments. What has added the legal twist to the law of liability is that about one year after the Bhopal gas leak case another industrial accident took place in the city of Delhi called the Oleum gas leak case. This was nowhere near as catastrophic as the Bhopal gas leak but the Supreme Court of India seized upon this case to lay down the law for accidents in hazardous industry.

Having considered the issue our Supreme Court laid down a new law of liability for hazardous industries. It basically held two things: The first was that if there is a hazardous or dangerous industry and there is an accident in such industry, it has an absolute and non-delegable liability to compensate for all damages caused. In other words, the principle is of absolute liability, without negligence or fault and moreover without any of the exceptions which are there in the Common Law doctrine of Ryland v. Fletcher. The second thing the Supreme Court did in this case was in relation to the measure of compensation. It brought in the "deep pocket" theory. The court held that the measure of compensation would relate to the capacity of the enterprise to pay the damages. In other words, larger and more prosperous the enterprise, the greater would be the compensation payable by it. The Court used the expression "enterprise" and not legal "entity". Thereby roping in the group and the parent company.

Therefore this is the position in India for the past over 20 years for liability of hazardous industries. It is with this background that the Government of India would have to bring in a legislation aimed at limiting liability of multinationals for hazardous industry. It should be obvious to one and all that such legislation would run into all sorts of problems from day one. Politically it will be projected as a "sell out" to powerful multinationals. It would have to be a very determined State which can publicly profess sympathy for multinationals over ordinary citizens of the country (no matter how obvious the overall prudence of such a step may be). Political sentiment apart, a legal challenge to the validity of the legislation limiting liability would surely follow. The matter would end up with the courts. I would expect a constitutional challenge to be filed very quickly and parallels drawn from what happened in Bhopal and how multinationals should not be allowed to get away lightly. A court challenge would no doubt push (more specifically) the US involvement calendar back by several months and may generally have the effect of dampening enthusiasm of foreign players for some time but this would really be a blessing in disguise. It would remove the uncertainty of having such a legislation which runs contrary to current legal position. It would be like getting an advance ruling in hand as to legal position and indeed make the project more bankable.

I would also expect that notwithstanding the Oleum gas leak judgment (which lays down the some what harsh or extreme law described above), the courts would ultimately uphold the Nuclear Liability Act (assuming it is based on International Conventions and standard practice in most countries).


Hence to conclude, I would say that India desperately needs to create its power infrastructure and the nuclear programme is integral to this vision. The Government has shown its commitment to push its agenda aggressively and take home the advantage it got by getting the NSG waiver. The immediate road may be somewhat bumpy specially on the nuclear liability legislation front but ultimately I would expect the field to be cleared and India becoming a happening market for nuclear power plants and ancillary industries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions